The financial landscape is set to change again – dramatically – as the government winds up the schemes aimed at helping businesses through the pandemic. Andrea Reynolds, Founder and CEO at Swoop, says that with careful planning, hardship can turn to opportunity
Coronavirus brought with it a crisis and while the British government’s response has seen some fall through the net, a large number of individuals, SMEs and industries have been scooped up and given meaningful help.
Unfortunately, the time for state-backed generosity is quickly running out: furlough payments are ending and loans under the Coronavirus Business Interruption Loan Scheme (CBILS), aimed at supporting SMEs that needed funding to survive the pandemic, now need to be repaid.
We all knew that the largesse of the State couldn’t last forever, and the first anniversary of your CBILs loan may mean businesses facing a substantial interest rate increase as well as starting repayments.
The difficulty is that while some businesses are in a good position now to repay their loans, cover staff wages and struggle back onto their feet, for many, there simply isn’t enough cash in the bank to service the old debts and pay the new bills.
With Christmas just around the corner, many companies are feeling that the rug has been pulled just as they are tantalisingly close to being able to meet their commitments. Fortunately, further help is at hand: we now have the ability to refinance that CBILS loan and provide you with another year of interest free payment, thanks to the RLS.
The Recovery Loan Scheme (RLS) is the latest solution to helping businesses and the offers available to SMEs are pitched to be attractive: lenders from traditional banks and challengers alike are figuring out products that can step into the gap between the end of government generosity and the beginning of full solvency.
Clearly, it makes sense for businesses that need some breathing space to refinance their existing loans to achieve better terms.
For struggling businesses this is a potential lifesaver, if (and it is quite a big ‘if’) they can navigate through a bewildering array of offers that is growing by the day as more products gain accreditation under the RLS.
One of the best that we have found at Swoop and which we have just added to our platform, is an interest-only loan of up to £250k for 12 months. Fully backed by the RLS, this product could be an affordable way for businesses to buy some time.
For businesses that borrowed more than £250k under CBILS, a personal guarantee will most likely be in place. You may, however, need to borrow more to execute your expansion plans. In these cases we are delighted to be the chosen platform for a fantastic unsecured growth finance loan from BNP Paribas. The product requires no personal guarantee, with repayment terms of eight years and favourable interest rates. This loan fills what is known as the Growth Capital Gap in the UK market for growth-oriented businesses looking for between £500k and £5m.
As always we are keeping an eye on new grants being published with the latest round of innovation and regional grants just released in September. Our website swoopfunding.com will have an up-to-date list, as well as further details of the products mentioned above.
While the Covid crisis hit hard and fast, full recovery will likely have a longer tail and there will not be a set date when we will definitely say it is all over – not for the country and certainly not for the business community. Some sectors will struggle more than others.
To sound an optimistic note, however, business owners should remember that comparison is the thief of happiness: it does not matter how well others are doing, what is important is how well you are doing.
I believe that financing is not just something that SMEs need, it is something they can use. Savvy business owners can make financing work for their business rather than the other way round: by comparing the best finance options for their business and have the assistance of our funding experts to manage the process to completion, clever use of loans can be part of a growth strategy rather than a plunge into a safety net.
When money is tight, businesses don’t take risks, they don’t innovate and they don’t think big. As we have seen in the last two years, those who think big in times of trouble are the ones who emerge strongest, fastest.
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