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How SMEs can improve their chances of securing a CBILS loan

Written by Andrea Reynolds on Monday, 04 May 2020. Posted in Funding, Finance

SMEs welcomed the launch of the Coronavirus Business Interruption Loan Scheme, but it got off to a slow start. Here are a few tips for how your business can accelerate the application process.

How SMEs can improve their chances of securing a CBILS loan

SMEs welcomed the launch of the Coronavirus Business Interruption Loan Scheme, but it got off to a slow start. Here are a few tips for how your business can accelerate the application process.

As the spread of the coronavirus forced the UK into lockdown, Chancellor Rishi Sunak announced a package of emergency measures worth £350 billion to support businesses and protect jobs, with £330 billion earmarked for guaranteed business loans. However, concerns that the measures overlooked small and medium-sized enterprises (SMEs) prompted Mr Sunak to launch the Coronavirus Business Interruption Loan Scheme (CBILS), offering loans of up to £5 million to companies with a maximum turnover of £45 million. Under the scheme, the government covers interest payments for the first year, and borrowers may be entitled to a capital repayment holiday for six or 12 months (depending on the lender). Contrary to some reports, interest rates are competitive, with traditional banks charging as little as 2.5%.

While SMEs welcomed the arrival of CBILS, many complain that they have struggled to secure funding. Lending was initially slow- the scheme launched on 23rd March, but by 6th April only 2,022 loans had been approved at a total of just over £290 million, according to industry body UK Finance.

Accelerating SME access to loans is crucial. Figures published by the Association of Chartered Certified Accountants and the Corporate Finance Network suggest a third of businesses may not survive another two weeks of lockdown without it, rising to 38% if lockdown continues for four weeks.  

There are steps SMEs can take to speed up the application process and boost their chances of success. Lenders require a 12-month cashflow forecast, but it must take into account any other schemes and interventions provided by the government. So, if your company has furloughed staff or taken advantage of the VAT deferral period, make sure you include this information.

Next, assume business activity will restart in July and estimate your sales and expenses over the coming 12 months. This will reassure lenders that the loan will cover your cost base while the economy recovers. 

In addition to the cashflow forecast, you will also need to submit your profit and loss statement and balance sheet for the financial year ending 2019 plus your year-to-date management accounts.

The official guidance encourages you to approach your primary bank in the first instance, but the criteria determining a borrower’s viability vary so be prepared to shop around. Most lenders expect your company to be profitable, while others insist accumulated losses cannot amount to more than 50% of the share capital. Here at Swoop Funding, we are calling on the government to address this lack of consistency as it creates confusion among business owners.

Some of the criticism aimed at lenders has been unfair. After all, they had to adapt to a challenging business environment with reduced capacity, while retraining staff and developing a new product. Nonetheless, they managed to launch CBILS in a matter of days rather than months.

The good news is the volume of approvals increased dramatically to more than 6,000 by 14th April. The value of loans now stands at over £1 billion, and the number of accredited providers has risen to 43. As lenders increase their capacity to deal with applications and new providers complete the onboarding process, the issuing of loans should continue to gather pace.

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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