The Coronavirus Business Interruption Loan Scheme – what is it and is it for you
The pressure and challenges that the global health crisis is bringing are having an enormous impact on businesses large and small. The resulting economic shockwaves, now and in the coming months and maybe years, are weighing on the mind of every business owner, and the Government is listening.
Adapting quickly
Business owners and managers might currently have multiple sources to turn to for advice, as well as a variety of demands on their time, staff and cashflow. In these unique circumstances, the daily news updates can cause further upheaval or doubt as to the decisions made that day.
In crisis times, businesses that adapt quickly will survive or even gain a competitive advantage. Wait and see is not an option. Depending on the pre-crisis health of the company, a variety of initiatives can be accessed. One of the flagship programmes from Government is the Coronavirus Business Interruption Loan scheme (CBILS).
As the centrepiece of the Government support package for businesses that are losing revenue, and seeing their cashflow disrupted, the scheme has been met with much applaud, some inevitable criticism, and from business owners, many a question.
The practicalities
The Government will guarantee 80% of loans up to £5m for up to six years, with the first twelve months interest free. The central premise is that lenders can support businesses without taking on the risk. After an initial backlash, due to some big banks demanding large personal guarantees including primary residence, there were amendments made and now no personal guarantees are required on loans under £250K. For loans above that, the guarantee has been limited to 20% with the business owner’s primary residence excluded from consideration.
Following commercial manoeuvres from some banks who asked companies to move all accounts over to them to qualify, the Government amended the rules which means there is now no requirement to move business accounts or other lending facilities to the lender in question to access the Government backed funds.
The eligibility of the scheme is extensive, applying to any company turning over up to £45m that is losing or deferring revenues as a result of the crisis.
Forty lenders, including most of the big banks, have been accredited as part of the scheme. Whilst Ultimate Finance are not currently accredited, we are working with both existing clients and potential customers to support them in looking at the multiple options available to them. The CBILS may be one strand of potential support, that complemented by another, gives a company the stable footing needed in these extraordinary times.
The importance of the SME economy
The Government has made a calculation that keeping the country’s SMEs up and running during this period is in the national economic interest, so whilst there has been many an eyebrow raised at the cost of the scheme, the potential cost of the loss of tens of thousands of businesses would be far greater.
The Chancellor and the Government are clearly listening, with adaptations to the scheme being warmly welcomed, but there are questions, perhaps for another time, about the depth of their understanding of the SME economy, having made those mistakes in the first place.
As a business owner under financial pressure with revenues falling, forecasts squeezed and decisions to make, a lag in decision making can be the difference between survival and insolvency.
It is advisable for businesses to speak with introducers and lending partners, so they have the clearest view of funding options available to them to keep their business moving.
Our CEO, Josh Levy recently hosted a webinar with business owners from around the country to provide more information on how to strengthen your financial footing and navigate these turbulent times. Click here to view the full webinar or read more in our Ultimate Coronavirus Financial support guide, which you can download here.
