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How will your business finance the recovery?

Written by Andrea Reynolds on Monday, 15 June 2020. Posted in Financial management, Finance

The gradual easing of lockdown restrictions will give business owners hope that some of the most challenging trading conditions in recent memory are behind us.

How will your business finance the recovery?

The gradual easing of lockdown restrictions will give business owners hope that some of the most challenging trading conditions in recent memory are behind us. The coronavirus pandemic will change the way many companies operate, and they will need to adapt to the new normal, but the restart of economic activity will be welcome nonetheless.  

The government deserves credit for the extraordinary steps it took to support businesses through the crisis, despite delays in distributing the funds. After launching the Coronavirus Business Interruption Loan Scheme (CBILS) offering guaranteed finance of up to £5 million, the Chancellor recognised smaller companies were struggling to access funding and introduced the Bounce Back Loan Scheme (BBLS). 

BBLS appeared to solve a lot of the problems that have dogged CBILS since launch. The application process is easier- it involves answering seven questions and submitting a self-certified form- and the funds arrive quicker. 80% of Swoop’s customers switched to BBLS when it launched at the start of May. Many needed more than the maximum loan of £50,000, but their priority was getting hold of funds to tide them over.  

The latest figures published by the Treasury show the volume of lending by BBLS far surpasses CBILS. In the week up to 7th June, 964,414 companies applied for funding through BBLS and 782,246 were successful, securing just short of £23.78 billion. In contrast, CBILS approved £9.56 billion in loans to 47,650 applicants out of a total of 93,305. 

However, BBLS has its own flaws. The sheer volume of applications has led to severe delays. One of our customers recently told us there were over 31,000 businesses ahead of them in the queue to open an account with a challenger bank, which is required to apply for BBLS funding. What’s more, £50,000 is a relatively low threshold. A loan of that size may help to cover the costs of surviving lockdown, although to what extent is debatable, but it won’t finance the recovery. 

What many business owners might not realise is some lenders now allow you to apply for CBILS (not to mention other sources of funding such as asset finance or invoice finance) even if your company has received a BBLS loan. You can also apply for both BBLS and CBILS at the same time. If the more expensive CBILS loan arrives first, it can be refinanced until November at the maximum interest rate of 2.5% charged by BBLS. The government still covers the first year’s repayments.

Some companies might have avoided CBILS due to the perceived length of time it takes to receive the funding, but  now at we are accessing CBILS faster than BBLS for our customers. Others may have been put off by the requirement for more information, but a cash flow forecast, which lenders require along with company accounts, is a vital tool for every business to navigate the crisis regardless of whether you apply for a loan.   

It’s also worth remembering the government changed the terms of CBILS, so you don’t have to provide a personal guarantee to borrow up to £250,000. You only have to cover 20% of the balance for any amount above that threshold.   

To sum up, don’t sit in a queue and wait for an overwhelmed lender to approve your application if your business is at risk of running out of cash. Make sure you access whatever funding is available, so you not only survive lockdown but also take part in the recovery.


About the Author

Andrea Reynolds

Andrea Reynolds

With 15 years’ experience in corporate financing, largely focused on matching businesses with funding and investment opportunities, Andrea launched Swoop in 2018 to help SMEs start up, scale up and finance their new ventures.

Arguably the UK’s number one expert in business funding, it’s not hard to see why she is affectionately known to colleagues and industry peers as the ‘Martin Lewis of business finance’.

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