Many of you have made applications to borrow money under the Coronavirus Business Loan Interruption Scheme (CBILS) or the Bounce Back Loan Scheme (BBLS). Some of you have made these applications in addition to other forms of support, and for some of you this may be your only lifeline.

CBILS

The Government have made it clear that they will not be able to help all businesses and that is reasonably understandable. However, within the group of businesses they are unable to help, one would hope that it is confined to businesses that irrespective of the impact of COVID-19 would more than likely have failed. Fair enough. I see little point in flogging a dead horse. However, we’ve seen a number of applications under the CBILS scheme rejected despite the fact that the business is roaring. That can’t be right. The spirit of the Government support is to help businesses like this and in so doing achieve 2 things. Firstly, the business survives and hopefully everyone gets to keep their job. Secondly, it’s more fuel to stoke the economy, both from the business and everyone who works within it.

So what has gone wrong? It looks as if the ‘blame’ rests with the bank. Underwriters are getting involved (not unreasonable, the bank is still exposed under the CBILS for 20% of the debt) and they seem to be pulling the rug. Maybe because they are nervous that they are unable to request any additional security (personal guarantees) for loans under £250k, or maybe because they are simply not asking the right questions. Either way, the consequence of failure to provide credit into an otherwise thriving business will unnecessarily damage our economy.

What can we do?

As regards to the existing application under CBILS, I can’t see that there is much you can do. There appears to be no ‘appeals’ procedure, and even if there were, I’m not sure anyone would listen as they are all too busy running around like headless chickens. The banks have been massively disappointing in the CBILS arena and are guilty, again, of offering umbrellas when it’s fine yet asking for them back when it’s raining.

Are there any successful applications?

Well, yes there are. I don’t know if it’s a regional thing, or a bank thing but most businesses we deal with in the London area have had success, one offer even calling up to reduce the rate to 2.9%. That is a remarkable result. Yet banks in Cornwall, where we work, are less keen. Often a straight forward ‘no’ and no explanation given.

BBLS

Fortunately, I’m hoping that we will see a greater success rate, right across the board, for BBLS applications. The whole process feels really slick, an application process that takes less than 10 minutes, some checks, some forms to sign, some more checks, and then whoosh – the money should turn up in your account……or at least we hope so. It’s early days, but so far so good and some money has already been paid out.

Frankly, other than the fraud checks and confirming the self certification process there should be no reason why the bank should say ‘no’ to these loans. They have absolutely no exposure to risk – given that they are 100% guaranteed by the government – and they are charging 2.4% above the base rate, a reasonable return in any climate. But of course, it’s not a done deal by any means, and not wishing to be cynical but we shouldn’t get over excited until we really see the money flow into our accounts. Please keep me posted in this respect.

Should I apply for BBLS?

Personally, I think a better question is – ‘Under what conditions should I not apply for a BBL?’ In most cases, there are very few reasons why you should not apply, even if it is to squirrel away for 12 months and repay, in full, at the end of that time. The point here is (and hopefully we’ve all learnt this lesson) we don’t know what lays ahead and having some degree of financial security in place now is never a bad thing. But back to the point – why shouldn’t I apply? Here’s some reasons;

• You will be unable to meet the loan repayments.
• You are borrowing it for a highly speculative venture.

I’m sure there could be other reasons but I would still recommend it to anybody, even if they have sufficient cash to see them through the foreseeable future. I’ve mentioned it before but putting all the money into Premium Bonds is no bad thing. I know that you should not use it for ‘personal use’ and that only individuals can invest in Premium Bonds, but given the 100% guarantee of the investment (by the Government) it doesn’t feel to me that you have wandered too far off the designated path. If you leave the money outside the company too long you risk having to pay tax on it. So, you had best keep an eye on that. That is not the intended result.

Finally,

Lockdown and loans are 2 different things. Lockdown, we all hope, will be eased over the next few weeks. The loan, should you wish to use it, will be with you for the next 6 years. If you do plan to keep it, make sure you get the maximum leverage from it, and use it wisely to boost your business. Once again, this comes back to (financial) modeling, and by now, I hope you have all done a few of these.

My contact details

Landline – 01326 660022
Mobile/WhatsApp/Text – 07779799995 – Mike Hutchinson
Zoom ID – 205 677 7765 – Mike Hutchinson