As the UK eases its lockdown measures and tries to get the Economy back on its feet, we look at the impact of some of the Government’s supporting finance measures in the last few months. Drawing on the thoughts of both Shipleys’ specialists and our valued contacts, we assess how the measures have fared.
24 June 2020
In a bid to help organisations survive the economic challenges the coronavirus-measures presented, the Chancellor introduced a number of Government-backed loans. Phased in at different times during the lock-down, these comprised:
- Coronavirus Business Interruption Loan Scheme (CBILS) for small to medium sized businesses. Loans of up to £5m were available per business with no interest for 12 months.
- Coronavirus Large Business Interruption Loan Scheme (CLBILS) for larger businesses with a turnover of more than £45m. They could borrow 25% of a company's annual turnover up to a maximum of £200million and with a Government guarantee of 80%.
- Business Bounce Back Loan Scheme – Small businesses could borrow between £2,000 and £50,000. Loans are interest free for the first 12 months.
- Future Fund – this provided UK-based companies with between £125,000 and £5 million from the Government, with private investors at least matching the Government commitment. The loans would automatically convert into equity on the company’s next qualifying funding round, or at the end of the loan if they were not repaid.
Other financial support in the form of the Coronavirus Job Retention Scheme, the Self-Employed Income Support Scheme, business rate holidays, grants and tax deadline extensions etc were also provided. This article focuses solely, however, on the loans.
High demand
Figures from Her Majesty’s Treasury show that across the board, there has been high demand for the finance. On 21 June 2020 the tally stood as follows, and we’ve added in the additional column to show the success rate of applications.
| At 21 June 2020 | Value of Facilities approved |
Number of Facilities approved |
Total number of applications |
Success rate of applications |
|---|---|---|---|---|
| Coronavirus Business Interruption Loan Scheme (CBILS) |
£10.53bn |
50,482 |
98,975 |
51% |
| Coronavirus Large Business Interruption Loan Scheme (CLBILS) | £2.10bn |
315 |
709 |
44% |
|
Bounce Back Loan Scheme (BBLS) |
£28.09bn |
921,229 |
1,123,683 |
82% |
|
Future Fund |
£236.2m |
252 |
623 |
40% |
*Note the Future Fund’s figures relate to convertible loans
The ease and difficulty of securing the different finance options
The tally reveals an interesting picture of the ease and difficulty in securing the different finance options. Shipleys Principal, Ben Bidnell, said,
“The different success rates of applications doesn’t surprise me. In our experience, businesses were able to access the Business Bounce Back loans relatively easily as the application process was quick and straightforward. In contrast the application process for the CBILS and CLBILS, was far more involved and protracted. We had many clients coming to us for help in formulating the applications. It required a detailed case to be put together to aid a successful outcome. In the early days there were fewer providers for the larger loan schemes, and those who were in the market were overwhelmed by demand. Since then more financiers have been approved and that’s greatly helped.”
Ben’s view is also echoed by some of the finance specialists Shipleys works with.
Kayleigh Graham at Capitalise said,
“During these challenging times we have seen businesses really leaning on their accountants to give them the support they need to complete often very lengthy applications for CBILS. The application process has been gruelling for all parties, lenders included, and it’s been really tricky for businesses to navigate the market and access the funding they need. This time has really highlighted the need for accounting data to be kept current and up to date and has been a chance for business owners and accountants to work together and really understand their finances.”
Neil Hutton at SME Business Finance, added,
“Whilst Business Bounce Back Loans were welcome relief to many, as lock-down continued many businesses needed more cash than the £50k available. In the early days banks, were taking weeks to approve the CBILS facility and even then the application success rate wasn’t great. More funders have now come into the market and a CBILS can be taken out to both partly pay back a Bounce Back Loan and give the company extra cash. This is because you can’t have both a BBL and a CBILS. The protracted nature of the lock-down, however, has caused real financial challenges to businesses.”
Talking to Shipleys’ own bank – one of the major high street brands – a contact said that in the first few weeks of being announced, the CBILS terms kept changing which added further complications to its roll-out. He added though that pre-lock down, many banks were already reaching out to customers to instigate measures to ease liquidity – such as capital loan repayment holidays. As the lock-down intensified his bank instigated a senior vetting process where only the Head of Commercial could approve a loan application to be turned down. This demonstrated the keenness of the banks to support customers as much possible.
Easing businesses out of lockdown
The Government figures show that demand for the loans remains steady and their volumes are currently increasing each week. As the lockdown gradually eases, what other finance measures are emerging to help businesses get back on their feet?
Kayleigh Graham from Capitalise said,
‘As more and more businesses begin to open up and we begin our return to ‘the new normal’ it’s important to recognise that the lending market is beginning to open up again with property backed lending, invoice finance and merchant cash advances looking like the most prevalent products in the space.”
Ben Bidnell agrees that there is still plenty of alternative finance options open to businesses. Venture capital is still available with specialists looking for investments. His team has helped businesses source alternative sources of finance such as invoice finance, asset finance, merchant cash advance on credit card transactions, property finance such as bridging loans and working capital loans to finance everyday operations.
The Firm’s bank contact commented that some businesses are using the current situation to take stock of their operations and recalibrate them. Lessons learned from the move to home working, businesses coping despite having furloughed staff and new forms of operations emerging have prompted some owners to reconsider their business model and even if they need their premises in its current form.
Touching on commercial property, Kayleigh Graham said
“For businesses with unencumbered property assets or low loan to value (LTV) rations, they will be able to borrow at the lowest possible rates in the market. 45% of Commercial property in the UK is owned outright, so there is plenty of scope to leverage these assets where available for low rates in support of their operations.”
Looking ahead
Looking ahead all agree the path will be tough but not impossible. The crisis has shown how flexible and agile both businesses and lenders can be in the face of unprecedented challenges. Current interest rates remaining low will certainly help business plans.
Most sectors need a strong final quarter of the year for the Economy to start to recover and it’s anticipated the Government may initiate more support – such as tax breaks and other incentives to encourage people to go out and spend again. That said there are still currently plenty of options for businesses when it comes to financing their emergence out of the lock-down.
Can we help?
Our specialist team have helped many organisations put in place the finance measures they need to safeguard and grow their business. If you would like to discuss how we, and our network of valued finance contacts, can help, please do get in touch.
