Here’s what the Chancellor needs to do, to improve the CBIL scheme

Rangewell, the business finance specialists, are calling on the Chancellor, Rishi Sunak, to make three further changes to the Coronavirus Business Interruption Loan Scheme (CBILS).

This comes as a business owner told LondonLovesBusiness of their experience of dealing with NatWest in trying to get a CBIL for their business.

The business owner who asked to remain anonymous said, ^{“My business deals with the hospitality industry mainly supplying super cars which are rented out for films, weddings and events. Up until CoVid19 we were doing exceptionally well but now that we have closure of these venues and also the lockdown my company has zero income}

^{“I therefore contacted my bankers who are NatWest to ask for a Business Interruption Loan (CBILS). The response was that my company did not make a profit and that therefore I am not suitable for a Nat West loan. I responded by saying that my very clear understanding from Rishi Sunak is that in these circumstance the bank would allow a loan to be approved using the new CBILS which guarantees 80% of the loan.}

^{“NatWest made it very clear that they were not prepared to discuss any help whatsoever for my company. I further responded that my employees would lose their jobs and that I would lose my company which is just under ten years old and with the loan would have made a full and successful recovery. Apparently this issue is of no concern for Nat West Bank. Totally and utterly disgraceful”}

What Rangewell proposes are relatively simple, will save thousands of companies and should be implemented immediately.

1. The squeezed middle has been helped – now it’s time to help the “squeezed sectors”

We welcome the changes The Chancellor has made to provide support to the “squeezed mid-sized companies” allowing them to access loans up to £25m but now he needs to focus on better support to the “squeezed sectors.”

• The hospitality, retail, childcare and leisure sectors have never been popular with High Street Banks or Mainstream Lenders
• The Treasury has already identified a full list of such businesses via the “Business Rates Holiday Scheme”
• Healthcare businesses such as Dentists, Opticians, Pharmacies and Vets have either been forced to close or are operating reduced hours under immense capacity constraints. They will perform vital roles in the health of the Nation once the lockdown is lifted
• The Treasury has a full list of such businesses via their regulatory bodies
• Subject to business viability checks, The Treasury should underwrite 100% of loans up to £250,000 to such businesses

Nic Conner, Rangewell’s Head of Research said, “The firms most at need are those in sectors which have always struggled to gain finance, like Hospitality, Leisure and Retail and those vital services like Pharmacies, Dentists and Opticians that will be bearing the strain once Lockdown is lifted.

“The most at-risk sectors and the businesses who are operating at their capacity constraints who need the money urgently are unable to gain the funds quickly and efficiently – this could not have been the Government’s intention.

“The Treasury needs to underwrite 100% of the loans up to £250,000 to these at-risk sectors which they have already identified via the “Business Rates Holiday Scheme” or who are members of Healthcare Regulatory Bodies

2. Better support for viable but loss-making businesses

CBILS, as it currently stands, is not working for loss-making companies. Banks are lending to businesses “if they would have lent to them last year” and this effectively excludes loss-making business from the Scheme.

We suggest that The Treasury loosen the rules around SEIS and EIS investments for the full 2020 / 2021 tax year to allow wider uptake of such schemes and allow equity investments to support viable but struggling loss-making businesses.

We suggest:

• An increase in SEIS relief to 70% and EIS to 50%
• A doubling of the amounts that individuals can invest in the scheme during the 2020/2021 tax year
• A relaxing of the eligibility rules in consultation with Trade Bodies

Conner added, “A loss-making business is not a bad business. Often they are investing heavily in growing market share, rolling out a concept or building world-leading technology.

“We cannot let Conoravirus wipe out a generation of our young and fast-growth businesses – they are the future of UK Business.

“Many businesses can’t or don’t want to take on more debt at this time – by tweaking the already extremely successful SEIS and EIS rules, the Government can quickly provide support to thousands of viable businesses who currently can’t access the CBILS Scheme.”

3. Open the CBIL Scheme to a much wider range of lenders

In Rangewell’s Open Letter to the Chancellor last week, they noted that Banks have been telling them they are swamped with applications and will not be able to deal with a large number of SMEs who will need to access the scheme.

Rangewell believes the High Street Banks and Mainstream Lenders are doing their best to work within the government system at a time when the demand for finance has grown.

These lenders have seen a huge demand for CBILS whilst, at the same time, their offshore processing offices in places such as India are closing due to lockdowns. This workload has been put on an understaffed UK team who are struggling to deal with the scale of enquiries.

The Treasury should open the CBIL Scheme to a much wider range of specialist, fintech and private lenders with immediate effect – these lenders are already regulated, have strong credit, risk and back-office systems, work alongside multiple government agencies already and are keen to support the CBIL Scheme as quickly as possible.

Conner said, “We are calling on the government to widen the range of lenders who can access the scheme with immediate effect. Britain has the most active and diversified range of lenders in the world, many of whom emerged from the lessons of the last financial crisis.

These lenders, and many others like them, already work alongside government agencies to diversify the source of funding to British SMEs and they stand ready to help and support SMEs through the CBIL Scheme.

If the treasury opens the scheme up to fintech platforms and specialist lenders then this should release much of the volume pressure on the High Street Banks and Mainstream Lenders.”