• Mike Duff, Managing Partner

Coronavirus - Government Support options

Updated: Jul 6, 2020

In this article we examine the loans and grants available from the Government to help companies tackle the economic challenges arising from the Pandemic.

The first crisis loan to launch was the Coronavirus Business Interruption Loan Scheme (CBILS) which received a lukewarm reception due to its less attractive interest rates, difficulty in accessing, and security requirements. This was followed by the Bounce-back Loan, which conversely was a game-changer for many small businesses. More attractive interest rates and an easier application process was enough to sway many business owners to take up this finance option. The local authority cash grants and the discretionary grant also offer welcome but limited relief for eligible businesses.

Success Rates

For CBILS the chance of success is about 50/50 with banks generally favouring businesses with a track record and newer enterprises often excluded, (even those that have strong business propositions and existing contracts in place). In comparison, bounce-back loan applications have an approval rate of more than 80%. That said, an issue faced by many businesses is that the banks operating the schemes have prioritised existing customers, so those approaching a bank without a prior account have been unable to easily access funding.

Assessing the Options

Whilst the bounce-back loan has provided a vital lifeline for many small businesses, it is limited to 25% of turnover up to a maximum of £50,000. For those businesses needing to borrow higher amounts, this can create a bit of a quandary. Should a business apply for example for £100,000 at less attractive interest rates with a lower chance of success or should it “make do” with £50,000 and try to top this up with other finance options, or by cutting costs by more than necessary or desirable. Application delays, confusion and a lack of resilience planning are the ingredients for rash decisions, so it makes sense to pause, analyse and complete two key tasks;

  1. Explore other viable options for grants and funding. There are new opportunities every week and some great schemes already out there which very few businesses know about.

  2. Put in place a robust financial plan that allows some contingency and enables you to closely monitor any risk factors. Check your assumptions carefully to ensure it is accurate and realistic. This should include how you will use the furlough scheme (including part-time options) and any redundancy plans, ensuring this aligns with your sales strategy and forecasts.

Look to the Future

It is also worth noting that if you succeeded in obtaining CBILS and you would have been eligible for a bounce-back loan, you can convert it over. Even if your business is in a comfortable cash position, you should consider taking advantage of the support options available, (if only for the interest-free first year). Could you replace existing interest payments or simply improve your reserves, so you are in a stronger position to cope with further uncertainty? This could well prove a sensible precaution as furlough support payments drop off, recession looms, and Brexit is back on the radar!

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