Many small and medium sized (SMEs) businesses will have been reassured to hear about the steps that the government is taking to ensure firms can survive the current coronavirus crisis. SMEs have welcomed the news of the introduction of the coronavirus Business Interruption Loan scheme (known as CIBLS).
KIS Finance said, companies are struggling to access financial support.
But as companies try to access this support many are finding that the banks are not making it easy to get the financial support that they need. Rather than making the process as quick as possible for companies in distress, the banks are taking this opportunity to cash-in on the crisis by insisting companies apply for a standard business loan first. Only if they then fail to meet the normal criteria will they be able to apply for a loan under the CBILS.
Even then there is a lot of uncertainty on exactly what forms of security the banks will be asking for from businesses, if they are considered for a loan under the Coronavirus Business Interruption Loan scheme. Some lenders have been asking for personal guarantees which would place the personal property of business owners at risk if their business were to fold due to the crisis. Rather than helping companies in line with the Government’s intentions, the banks seem to be creating barriers which will prevent businesses from getting the financial support that they so desperately need and the Government openly promised.
Under the CBILS companies can apply for a loan of between £25,001 and £5m for up to 6-years to help them survive the current crisis. Those needing financial help over a shorter period can access overdrafts and invoice finance for up to 3-years through the scheme. Loans arranged under the scheme will be interest free for the first 12 months and there’s no need to make any repayments for the first year either.
With the vast majority of businesses being impacted by loss of trade, falling sales and cash flow issues, this certainly sounds like very welcome news. So long as their annual turnover is less than £45m and they would be a viable business if it weren’t for the impact of the virus, companies will be eligible and will be able to borrow up to the value of 25% of their 2019 turnover or twice their annual wages bill.
Loans can be accessed via 40 lenders who are currently part of the scheme and companies are being directed to apply via their normal business bank in the first instance.
However, this is where the problem starts! On approaching most of the main banks, companies are being advised that they must apply for a normal business loan in the first instance. Only if they fail to meet the normal lending criteria will they then be considered for a loan under CBILS.