Businesses need cash at the moment whatever their shape, size or background. The old adage that cash is king has never rung truer. For this reason, bank in the spring, the chancellor of the exchequer announced a number of measures to improve liquidity and support business. Headlining the act was CBILS and more latterly its big brother, CLBILS.
There has been a lot of press about the government-backed Coronavirus Business Interruption Loan Scheme; much of it was pretty negative as companies found it hard to get what they see as a timely response or a fair hearing. We have heard horror stories of interest rates in the teens and sizeable personal guarantees. Whilst this has settled down, there is certainly evidence of an inconsistent approach both between the funders and within organisations.
Part of the reason for these headlines is that often CBILS may not be the most appropriate solution; Fundamentally what is being offered is a loan, not free money, and bankers need to have seen that other solutions have been reviewed first. Applications should not be made until all the different angles have been covered so that there is a single consistent message given to the funder, demonstrating why other options are not appropriate and exactly how the new lending will be repaid.
Interestingly over the last few months we have seen new entrants come into the CBILS market who will provide CBILS to new customers. We have just completed a £1.5m CBILS loan with Arbuthnot for a client who had been turned down by both incumbent banks
In this situation we worked with a business services client where the CBILS loan was part of a package which included a £2m asset backed lending line - taking the whole facility to £3.75m
Other clients currently have a cash surplus but are seeking to put facilities in place to ensure that sufficient headroom is maintained to accommodate whatever uncertainties are thrown at us over the next few months, whilst others are also taking this external prompt to re-consider their overall business financing alongside future investment needs. Interestingly, several of these firms have come to us having already approached their bank but found:
- Getting a full hearing is difficult given the high number of enquiries the banks are receiving and it is recognised that their day-to-day banking contacts may not be best placed to consider/approve more complex debt solutions.
- Preparing documentation is time consuming and, with banks’ resources stretched, there is also far less guidance available than in more normal times.
- There is an understandable concern that applications might miss the mark in a situation where timing may be critical, particularly given many owners lack the experience to know exactly what is required.
Business owners are finding the above factors, together with the need for active management within their own businesses, are simply too much to address simultaneously. Equally, in taking on new debt, businesses are keen to ensure that they minimise the impact of this and are therefore keen to consider alternative solutions.
We have prepared a comprehensive guide, “CBILS and Beyond” to highlight the key points on the different government backed business assistance available and suggest the sort of measures that funders will expect you to have considered before approaching them.
Our streamlined process takes information from clients for review and formalisation into a bank-friendly “sightings paper”, which is then submitted through our well-established banking connections and facilitates faster processing onto bank systems.
External funding is, of course, only one part of a package of measures business owners can take. Early action to consider what buffer may be required is essential. Rushed solutions are never optimal.
At times like these, it can be a lonely place running a business. Sometimes simply sharing the problem and gaining fresh perspective can help mitigate that pressure. If you think we may be able to assist (and the Polestar team has considerable real-life experience both running businesses and advising business owners and funders through the economic downturns of 1990, 2000 and 2008), we are available to help – even if we do not have a full solution, we probably have a few ideas and an independent perspective.
There has been a lot of press about the government-backed Coronavirus Business Interruption Loan Scheme; much of it pretty negative as companies have found it hard to get what they see as a timely response or a fair hearing