The impact of COVID-19 threatens to be felt by the business community long after the current crisis abates and as we grow to understand how the social distancing rules will be relaxed, as business owners – our thoughts turn to how we rebuild our business and what form that might take. As members of the UK200Group, we have been involved in their lobbying process and as part of that helped write a survey to find out how the member’s clients were feeling.
Understandably, the survey showed that current confidence is low and there is an element of pessimism when looking to the future, but surprisingly 71% of respondents have not yet approached their Bank to obtain support from the Coronavirus Business Interruption Loan Scheme (CBILS). Whilst this may appear high, many have taken advantage of furloughing, allowing their staff to receive 80% of their wages direct from Government while they are off work, and may have also taken Time to Pay arrangements giving them both a 3 months deferral on PAYE deductions and not paying their spring VAT payment till 31 March 2021 latest.
This short term help may take you through the rigorous social distancing measures of the lockdown, but as this eases decisions will need to be made regarding funding working capital in an economy many respondents felt would be “a slow start that is difficult to predict”. Of those who have already visited the Bank, 66% have experienced difficulties and both we and the UK200Group feel that planning will be an important aspect to the success of each case and set out below a checklist to bear in mind when compiling your application.
- Is your business eligible to apply in that it must be UK based with a turnover of less than £45m?
- Do you have a borrowing proposal that would be accepted if it were not for the current crisis and can you self certify that you have been impacted by COVID-19?
- What sort of finance do you need? A term loan, an overdraft, invoice finance or maybe asset finance? Knowing this from the outset breeds confidence in your lender.
- A major issue relates to the amount that you want to borrow. How did you arrive at the number? And what are you going to spend it on because the Bank will need to know this. Many applications fall down because the Banker can’t be provided with a credible answer to this question. Just because the Government is guaranteeing 80% of the loan doesn’t mean anything will be passed so not being clear will hinder your application.
- What is the period that you wish to repay it over and how have you arrived at that? Holding a finger in the air isn’t the answer to this question and I think you should be discussing this with us before you rush into discussions with the Bank.
- What evidence have you available to help show the Bank you can repay the loan? For the smaller business the last trading accounts may all that be needed but as we get larger there becomes a need for Management Accounts showing performance and that you know how you are performing plus maybe a cashflow forecast demonstrating you can meet the repayments to a full blown Business Plan for more sophisticated and larger applications.
These requirements differ between lenders registered to the scheme so you ought to ask a question of your main Bank before you start. What this means is that there may be costs attached to an application which you don’t want. But how badly do you need the loan? Seeking professional advice at the start may assist your application and help it get passed without difficulty.
None of us have ever rebuilt our businesses after a lockdown but I fancy we would want to give our main attention to this task rather than producing another piece of information for the Bank because we hadn’t prepared properly. A well prepared proposal that ticks all of the boxes above is more likely to succeed as you’ve got the Banker onside and made their work easier.
If you need more information or assistance preparing your Coronavirus Business Interruption Loan Scheme paperwork, please get in touch.
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.