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SMEs pushing through loans ahead of the CBILS deadline
Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 28/07/2020

SMEs looking for loans of more than £50,000 under the Coronavirus Business Interruption Loans Scheme (CBILS) are now pushing through applications to make sure they can secure their finance before the scheme ends in September. CBILS launched in March 2020 and was one of three Covid-19 business loan schemes announced by the Government to help companies struggling to trade due to the Coronavirus lockdown. The CBILS scheme gave businesses a six-month period within which to secure 12 months’ interest-free finance across business loans, asset finance, invoice finance and business account overdrafts.


Applications for CBILS increased by 3,729 in the last week (up to 26 July), the greatest weekly increase since the end of June. The scheme has faced some criticism as businesses faced delays to get their lending approved and only half of those applying were successful in securing finance. Up to close of business 26 July, more than 57,000 businesses have received £12.7bn in lending through CBILS.


The most successful of the trio of business loans made available under the Government’s Covid-19 scheme is Bounce Back Loans. These loans of up to £50,000 were introduced over a month later and came with 100% backing form the Government. This means while those businesses taking a Bounce Back Loan remain completely responsible for paying it back, the lender can call upon the Government to repay the debt if the firm defaults. So far, Bounce Back Loans have supported over 1.1m businesses with over £33.7bn of loans. On average, four out of five businesses that apply for a Bounce Back Loan are accepted.
The final loans scheme available to businesses is Coronavirus Large Business Interruption Scheme (CLBILS) loans, aimed at the largest businesses that want to borrow up to £200m; £3.1bn has been lent to 457 businesses.
In total, these three schemes have now reached over £49bn of lending to 1.17m UK businesses, an eye-watering amount of business borrowing that was unimaginable before the Coronavirus pandemic. It’s a stark contrast to July 2019, when businesses repaid £2.5bn of debt, the first net repayment since February 2019 and as result reduced the overall growth rate of business lending.

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Business Moneyfacts Awards 2020 winners revealed

The winners of the 2020 Business Moneyfacts Awards were announced yesterday via a digital “social-media event” on Twitter and LinkedIn. All the results are available via @FinanceAwards #BMFAwards. To celebrate the winners of each award, a special, limited edition Business Moneyfacts Awards brochure is being sent to all Business Moneyfacts magazine subscribers and award winners.

Winners in a range of business finance categories included Santander, which won Best Business Current Account Provider, Hampshire Trust Bank for Best Business Fixed Account Provider, Virgin Money was named Best Buy-to-Let Mortgage Provider, Shawbrook Bank triumphed as Best Commercial Mortgage Provider and Hilton-Baird Financial Solutions for Invoice Finance Broker of the Year.

Full details of the winners, including those rated as Highly Commended and Commended, can be found on our Business Moneyfacts Awards 2020 page.

Lee Tillcock, editor of Business Moneyfacts, said: “All the finalists of this year’s Business Moneyfacts Awards have continued to offer value, choice and innovation across the commercial finance sector. A combination of methods helped decide on the final positions, and events of the last few months should in no way deter from the achievements of the past year, with hard work rightly celebrated. The finalists and eventual winners at this year’s awards should be rightly proud of their achievements and have offered a range of products and services that have best supported the sector at a time when its success and growth remains vital.”

 

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Coronavirus business help: Banks set out student loans scheme for struggling businesses

UK banks have proposed a new ‘student loans’ style scheme to help businesses that may struggle next year once their Coronavirus Business Interruption Scheme (CBILS) loans start to be paid back. The banks that are proposing the scheme claim that 780,000 businesses and three million jobs could be at risk if businesses cannot defer their loan repayments.
The proposed scheme would create a UK Recovery Corporation to which businesses would transfer their loans under CBILS into a tax debt with HMRC. This would allow businesses to pay back the debt when it is affordable to do so and to spread this debt over a longer period – potentially decades. The Banks believe this would be a more viable alternative than state backing of hundreds of thousands of struggling businesses.


To date £46 billion has been lent on Government-backed loans consisting of £31 billion in Bounce Back Loans of £2,000 up to £50,000, £12 billion in CBILS loans of £50,000 up to £5m and £2.7 billion of loans greater than £5m. Four out of five businesses have been accepted on Bounce Back Loans, that come with a 100% Government backed guarantee, while only half of businesses applying for CBILS loans have been successful, with the lower Government backing of 80%. This means the taxpayer will foot the bill on all future Bounce Back loan defaults and 80% of CBILS loans.
CBILS and Bounce Back Loans have provided essential cashflow to businesses whose trade has flatlined if not disappeared during the lockdown period. However, with UK growth not returning as quickly as expected and the tapering of the furlough scheme through to October, it is acknowledged that many of these businesses will not be financially strong enough to start paying back a triple whammy of CBILS loans, deferred VAT and business rates, all of which become due from March 2021.
The concerns about job losses are also supported by findings published today by the British Chambers of Commerce. This found that 29% of businesses expect to make redundancies in the coming three months before the Furlough scheme ends in October. The furlough scheme has already paid 80% of the wages of more than 9 million people with the Chancellor announcing a further £1,000 incentive per employee for businesses that return furloughed staff back to work and are still employed in January 2021. Micro businesses of between five and nine employees have placed more than half (57%) of their workforce onto furlough, placing these as potentially at greatest risk of suffering once the furlough scheme and the requirement to pay back CBILS, business rates and deferred VAT occurs next year.
It is expected if the banks’ proposed UK Recovery Corporation scheme goes ahead that over time these loans would be sold off to investors, in a similar way to the bad debts resulting from the 2008 financial crisis or like student loans.


The scheme is still at a proposal stage and matters of how to prevent fraudulent use of the scheme have not yet been outlined. Agreement on controls of dividend payments, salary bonuses and rules for when a firm is strong enough to repay all are yet to be agreed.


The Government is already set to foot the bill for businesses that default on CBILS loans and will now be looking at how to manage the potential of billions of pounds in guarantees owed to banks if businesses default next year. The cost to the public purse and to jobs across the UK is potentially catastrophic.

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Businesses urged to switch savings accounts to earn better interest

Just 35% of small business owners know the rate of interest they are currently receiving on their business savings account and, with some easy access accounts paying just 0.01%, they could be losing value on their funds as a result.

Figures released by challenger bank Redwood Bank found that not only did few small business owners know how much interest their savings were earning, but 37% of those interviewed had not moved their savings recently and have no plans to do so.

At a time when base rate stands at a historic low and economic uncertainty has resulted in many providers cutting saving rates, business savers need to be more pro-active to ensure that their money is in accounts that will offer them the best returns. “There is a huge disparity between the interest paid on different business deposit savings accounts,” explained Gary Wilkinson, CEO and co-founder of Redwood Bank. “COVID-19 has had a significant impact on small and medium-sized enterprises (SMEs) and we can see from our findings that there’s also a lot of confusion around what to do for the best when it comes to savings.

“Given the strain that SMEs are currently under at the moment because of the lockdown, it’s vital that businesses protect their cash reserves as much as they can. We urge business owners to be proactive and research savings accounts online to find the best possible rate, because at the moment many providers are paying little more than zero per cent interest.”

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Coronavirus Business Interruption Loans Scheme applications soar to highest levels since launch

At the end of June applications to the Coronavirus Business Interruption Loans Scheme (CBILS) exceeded 100,000, with the last week (21 – 28 June 2020) seeing a surge in applications as the economic outlook for many businesses continues to worsen. During this period businesses applied for 5,594 loans under CBILS. The scheme allows businesses that have suffered a loss of income due to Covid-19 to apply for business loans of between £50,001 and £5 million with nothing to pay for the first twelve months. There are also options for invoice finance, asset finance and business bank account overdrafts.


Lending has now reached £29.51 billion of Bounce Back Loans and £11.07 billion under CBILS and the two schemes have also achieved very different levels of approval rates. 81% of Bounce Back Loans have already been approved compared to 50% of loans under the CBILS.


Yesterday the British Business Bank, that manages the Coronavirus business loans schemes on behalf of the Government announced more new lenders. 365 Business Finance, FOLK2FOLK, Handelsbanken, LendingCrowd, Maxxia and Nucleus Commercial Finance will be offering finance to smaller businesses under CBILS. While, Close Brothers, ThinCats and HSBC Bank plc will provide finance under the Coronavirus Large Business Interruption Loan Scheme (CLBILS) to medium and large UK businesses (turnover of £45m or more). Coutts and Arbuthnot Latham join the other 21 Bounce Back lenders.


All these lenders are now accredited to offer CBILS, but they may not yet be ready to start lending due to preparations required in their processes and systems. Businesses should check either on the firm’s website or speak to a business loans broker to find out which lenders can help them now.

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