The Lending Landscape - UK (CBILS & BBLS)

Given the relative ease and simplicity of the Bounce Back Loan Scheme (BBLS) process compared to the Coronavirus Business Interruption Loan Scheme (CBILS) requirements, we are seeing clients who need anywhere up to £75,000 opting to try and get by on a £50,000 BBLS facility and not sourcing the right level of capital they need. We can help these businesses by syndicating funds with non-CBILS alternative lenders to top up the BBLS facility with a facility more appropriate to their circumstances and taking advantage of the 2.5% interest rate on a large portion of their borrowing.

As more alternative finance providers have become accredited to CBILS and started lending, they have created new opportunities for businesses which have been declined funding before and believe they’re not eligible for assistance. We are seeing numerous cases where newly accredited lenders are approving facilities despite them being declined elsewhere.

For businesses that are not negatively affected and operating as usual, the range of funders available has reduced as some lenders concentrate on purely BBLS and CBILS facilities. Numerous options are present, however the changing economic environment has influenced lenders’ criteria. We are working closely with clients to ensure that the right lender is approached.

There have been frequent changes to the funding options available for SMEs recently. New schemes and initiatives by the government have been introduced and revised according to the feedback received from businesses and lenders alike. For both schemes referenced below, the government will pay all fees and the first 12 months’ interest on behalf of businesses.

The BBLS is the quickest and easiest route to funding for any business that has been negatively impacted by Covid-19 and requires £50,000, provided it hasn’t already borrowed funds under CBILS. Businesses should apply directly with their main bank, or an alternative BBLS provider that will consider new customers. Lenders get a 100% guarantee from the government which has led to very high acceptance rates of applications, irrespective of no personal guarantees or security being required. Rates are fixed at 2.5% over a 6-year term.

CBILS is an appropriate solution for businesses that have been negatively impacted by Covid-19 and require between £50,001 and £5,000,000. As lenders only get an 80% guarantee, they are hesitant when approving applications due to which only half the CBILS applications have been approved. Lenders can only request security in the form of partial personal guarantees and debentures/charges on amounts over £250,000 for term loans. Rates vary from 2.5% to 15% over terms from 1 year up to 6 years.

As many accredited lenders are only supporting their existing customers, it is limiting opportunities. As additional security is only available on facilities over £250,000, many providers are only lending to businesses who require more.

Across both schemes, the maximum amount available to a business is capped at 25% of their 2019 annual turnover, with additional flexibility of double the business’ annual wage bill on the 2019 financials for CBILS.