Let’s talk CBILS. Or the Coronavirus Business Interruption scheme as it’s more formally known.
When the pandemic hit, the government was quick to act. They put in a raft of measures to support SME’s, from the Job Retention Scheme to the £330b UKP package of government-backed loans – which are available via applications to banks and finance providers (potentially doubling the current commercial lending debt in the UK overnight).
So far 6,020 loans have been approved as part of the Coronavirus Business Interruption scheme (as of 15th April 2020), totalling over £1.1 billion in lending (150% growth on the previous week). Currently, 28,460 formal applications have been made.
This past weekend the government-approved five new lenders to enter the scheme: The Co-operative Bank, Cynergy Bank, Coutts, OakNorth Bank and Neobank Starling Bank. They join the likes of Barclays, Hitachi, Close Brothers, Bank Of Scotland and Lloyds, to name just a few that are already accredited and up and running.
Progress is being made, even if the overwhelming opinion is that this isn’t the case. The challenge faced is that, regardless of how much money is made available via the government scheme, they are still relying on traditional banks to be at the forefront of the distribution method. The issue here is that the technology used by traditional banks hasn’t come under any of the innovation it needs to support demand.
Four years ago, while I was working in SME banking, clients were still looking at an average of 1-2 weeks to get a sub £50k loan underwritten. The business had 1000+ mostly unconnected systems, a global distribution of underwriters, processing centres functioning on different time zones and a reliance on internal email rather than picking up the phone. If a decline came back (which they did), it could take weeks to challenge. Even during average periods of application volumes, requests were placed into queues, and getting any of these applications bumped higher was near impossible.
Today those volumes have increased exponentially. Last week NatWest (who, as part of the RBS Group, hold the lion’s share of UK SME accounts) reported that their call centres were receiving over 25,000 calls a day on financial assistance programmes – a rise of 730 per cent. Alison Rose, The bank’s chief executive, told reporters “Our call centres normally take 3,000 calls a day; we are now receiving 25,000 which is why I’m redeploying staff, retraining staff and getting people to help.”
But beyond capacity issues, there are other challenges that banks face. At Capitalise, we have partnered with over 1700 UK accounting firms and business advisors to enable SMEs to get the best access to advisor-led funding. An SME, whose accountant uses the Capitalise platform, is four times as likely to secure financing. Yet, even with advisors and accountants at the core of what we do, we are still seeing challenges around lender documentation and critical information requests needed to enable us to progress with applications.
As it stands, banks and lenders have to triage applications. To start the application must fit the CBILS criteria, one of the core ones being able to provide a borrowing proposal considered viable by the lender. But, before even that, the lender must be presented with all the support information needed to assess the application accurately.
Pre COVID-19, the documents required for applying for funding via a fintech lender, could have been as simple as bank statements, last years filed accounts, a profit & loss (P&L) report and a promise of a personal guarantee. Now, banks are asking for a lot more. Even though the government is underwriting these loans, the banks still bear the responsibility should anything go wrong.
Under CBILS regulations, lenders are requesting the last three years full accounts with a detailed P&L report, 12 months of business bank statements and an up to date management of accounts. Also required is an aged debtor and creditor list alongside confirmation of any outstanding debt (provider, term, repayment) as well as a statement of personal assets, liabilities, income and expenditure from all Directors. Most importantly, a paragraph is requested on how COVID-19 has affected the business, what the funds will specifically be used for and a 12-month cash flow forecast that shows how they will trade out of this.
Applications without these may be put aside to allow those that have everything required to be looked at first.
This is why, now more than ever, the relationship between the accountant and their SME clients is key to business survival through this crisis. Logically your accountant will already have a lot of this information or at least have quick access to it via cloud accounting packages like Xero or Quickbooks. They are financially literate and can present your application in a favourable lender format – with all the required paperwork.
It’s a critical and unsettling time for many businesses. Yet, it’s more important than ever to ensure your application is timely and accurate if you are you navigate through the thousands of lending applications landing over the next few weeks.
To make it easier, Capitalise has set up a COVID-19 business support hub. Here you’ll fund guides and market updates – including resources on how CBILS works and how you can apply – in one digestible place.