The coronavirus Business Interruption Loan Scheme (CBILS), established by the UK Chancellor to offer loans to firms with a turnover of up to £45m, was a flagship announcement made in the early stages of the pandemic. This, along with the very welcome changes made to Time To Pay and VAT deferrals, will help but as we face an extension to the lock-down cracks are appearing in the implementation of CIBILS itself.
According to managed services provider eacs, maybe now is the time to look at how the Swiss have rolled out its business support scheme.
Roger Frye, Finance Director, eacs said, “It all sounded so simple. All a company had to do was access the money through more than 40 approved lenders and 80 per cent of the loan is guaranteed by the government. The reality is very different. According to reports, some 30,000 businesses have applied for the loan under the scheme, a figure no doubt dwarfed by the demand, which will without doubt be higher.
“Not only is the loan application process complex – banks want the submission of management accounts, cashflow projections, historic Reports & Accounts and even details on assets – it is also hugely time consuming. In today’s business climate that resource is the one many business owners lack. The resultant approach being taken by UK banks is less than supportive, in fact one could argue that the risk adverse culture is as strong as ever.”
The CIBILs scheme is being run through some 40 accredited lenders. Yet according to The Sunday Times the overwhelming majority are being made by two lenders, NatWest and HSBC.
Frye said, “To say that the UK scheme is patchy is an understatement and we are adding our voice to calls for the Chancellor to look to Switzerland to see how successful support for SMEs can be. The Swiss scheme comprises of two main elements.
The first enables businesses to apply for an immediate loan worth up to 10% of their annual revenues. This is capped at SFr500,000 or £400,000. This is interest free and provided by the Swiss banks, which are underwritten with a full credit guarantee on the amount by the Swiss government. To apply all you need is a simple declaration.”
The second loan facility is up to SFr20m or £16.5m. The Swiss guarantees 85 % of the loan, charged at 0.5% interest. The bank assumes risk of the last 15%, charged at a competitive rate.
“As it is run through the existing banking network and its customer relationships, the authorities were able to roll out the scheme almost overnight. Barely any new infrastructure was needed and banks already had the necessary credit history and data on their clients. Why on earth would we not do the same?” added Frye.
“It is absolutely clear that the current Government coronavirus loan scheme needs review. We would argue that the government needs to guarantee 100% of the loan, making banks more of a delivery mechanism for grants as opposed to playing the traditional role of credit gatekeeper. The SME sector needs support, it is the powerhouse of the UK economy and will be crucial to the economy rebound post-COVID,” concluded Frye.