Knowing where and how to source appropriate business finance can be challenging in normal times, so what should you do when the circumstances are unprecedented?
Dr Steve Walker, CEO of ART Business Loans (pictured below), and his team have championed the access to finance agenda for small businesses and social enterprises for over 20 years and Steve has frequently commented on the changing world of finance and the number of alternative finance offers emerging. If the pace of change has seemed to be rapid in previous times, ‘change’ is now occurring at a rate that was inconceivable even three to four months ago.
“As ART approached the end of the last financial year in March 2020 we had exceeded all lending targets and had lent a record £3.6 million to West Midlands businesses unable to obtain their full requirements from the banks,” he says.
“Little did we realise how everyone’s priorities were about to change! Access to business finance was to become more critical than ever, although very suddenly the focus would switch from growth and opportunities to survival, across all sectors and for all sizes of business.”
Soon after lockdown the Government stepped in to support an economy facing potential catastrophe. Its Enterprise Finance Guarantee (EFG) scheme, which provided 15% cover to lenders, was quickly replaced by a Coronavirus Business Interruption Loan Scheme (CBILS) which offers 80% cover to lenders and, when that was taking too long to reach businesses, it was supplemented by an easier-access Business Bounce Back Loan Scheme (BBLS) which offers smaller loans and 100% cover to lenders.
Crucially the Government itself is offering no new money to lend. These are both Guarantee schemes. The providers are lending what they already had and what new money they themselves can raise and the decision about whether or not to lend remains at their discretion. It is also important to note that whilst the Government guarantee is to the lender in the event of default, borrowers remain liable for repayment of their debts.
CBILS (Coronavirus Business Interruption Loan Scheme)
ART is accredited to offer the Government-backed CBILS, which covers loans of over £50,000.
“CBILS was established at pace to meet urgent need and so, somewhat inevitably, there were teething problems,” says Steve, “to such an extent that the scheme changed its terms three times in the first month. However, all the changes were to the benefit of the small businesses seeking finance.”
There are now over 75 lenders offering the scheme. Terms and access can differ from lender to lender, although the base terms are identical.
The benefits of all CBILS loans are:
An additional benefit is provided on an ART CBILS loan – there are no capital repayments for 12 months.
ART is currently lending between £50,001 and £150,000 under the CBILS scheme to businesses across the West Midlands and adjoining counties that are unable to meet their full needs through the banks.
BBLS (Bounce Back Loan Scheme)
BBLS offers loans of up to £50,000, with fewer questions asked. Designed to achieve speed and scale of delivery at a very low price, it is unsurprising that only banks are currently accredited to deliver them.
Steve says: “BBLS is a very attractive offer and the loans will certainly help many smaller businesses to survive. However, at present those businesses likely to need more than £50,000 will find that they cannot have both a BBLS and a CBLS loan. We are hoping that the Government will change the rules again to allow businesses to take up to the first £50,000 of their requirement under BBLS and any additional requirements of between £10,000 and £50,000 under CBILS. We believe that this more flexible access to affordable finance on a sliding scale will prove to be vital to many micro and small businesses in the months ahead, as their own needs become clearer.
TOP TIPS WHEN APPLYING FOR CBILS AND BBLS
Full details of both CBILS and BBLS can be found on the British Business Bank website including useful pages of FAQ: www.british-business-bank.co.uk
Thinking Long Term
When a crisis hits, the temptation is only to think about the here and now. But Steve’s advice is to try to take a longer term view. “I would urge businesses to give some thought to the consequences of their current actions and decisions beyond the first year of interest free credit,” he says. “Businesses still need to source finance that is appropriate to their needs, not just whatever finance is available.”
CBILS is due to be withdrawn after the end of September 2020 and BBLS in November 2020. After that ART, and other Community Development Finance Institutions around the country, will still be there, bridging the gaps in business lending where banks are unable to fully meet their needs and helping businesses to survive, or even thrive again.
ART’s lending team (pictured left) has a wealth of knowledge and experience when it comes to access to business finance and, now working from home, is as ready and willing as ever to offer information and guidance about the options available and what might best suit individual circumstances.” [Insert picture of ART’s lending team]
“We are anticipating that demand, and the impact of our lending on the economy, will be greater than ever in the year ahead,” says Steve, “and so we are sticking to our original plan of seeking additional capital to lend. We will call upon our considerable years of expertise in dealing with small businesses to continue to support, in line with our mission, viable businesses and social enterprises in the West Midlands unable to source their financial needs from the banks, while supporting job creation and preservation in underserved areas and communities.”
In addition to lending £50,001 to £150,000 under CBILS, ART is also currently offering loans of between £10,000 and £150,000 under its normal terms and conditions.
Full details of all loans available from ART and case studies of businesses supported can be found on its website: www.artbusinessloans.co.uk.
“Community Development Finance Institutions (CDFIs) will play a key role in the successful recovery of the UK’s economy, and in particular the regions hit hardest by the Covid-19 pandemic. By investing in micro, small and medium sized enterprises (SMEs) in deprived communities not served by other lenders, they progress the government’s long-term vision to foster inclusive economic growth, level up the regions and boost productivity.
“Evidence shows that peer-to-peer lenders lend to low-risk bankable businesses, not filling the finance gap for the businesses that cannot or are discouraged from seeking bank finance. CDFIs are the only lenders which are actively targeting the gap in access to finance with fair and affordable products.” From ‘CDFIs and an Inclusive Recovery’, published by Responsible Finance
More information about CDFIs can be found at www.responsiblefinance.org.uk
*This advertisement feature appears in the access to finance special report in the June/July 2020 issue of Birmingham Business
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