After CBILS: What comes next?
The Coronavirus Business Interruption Loan Scheme (CBILS) comes to an end on 30th September.
Despite calls to extend the scheme, the British Business Bank have confirmed they are sticking with their original cut-off date, although they have extended the deadline for lenders to process and approve applications until November.
The end of CBILS will create something of a vacuum as companies continue to search for financial support in order to recover and grow their business in the wake of the pandemic.
So, what are the best alternatives once CBILS ends?
An expanded EFG scheme
The British Business Bank has alluded that it may be reintroducing the Enterprise Finance Guarantee scheme (EFG), although nothing has been confirmed.
Launched in 2009, EFG was designed to stimulate the economy by providing Government-backed loans of between £1000-£1m to businesses with a turnover of up to £41m. The scheme was temporarily suspended after the introduction of CBILS, so it seems reasonable to anticipate its return come November.
However, the original EFG was widely critisised for having complex eligibility rules that were open to misinterpretation, even by the banks who delivered it. Furthermore, loans were only guaranteed up to 75%.
There has been some pressure to update the scheme with the improvements that made CBILS a success during the current crisis. Namely the broadening of the lending criteria and the increase in the loan guarantee to 80%.
Invoice finance
As businesses reopen and recover from lockdown, they will naturally start collecting more unpaid invoices in their sales ledger. This means they will have the option to advance cash from their invoices in order to fund and grow their business.
The success of the recent Government loan schemes lay in the removal of the red tape that prevents some businesses from accessing the cash they need quickly enough. The end of these schemes could herald a return to lengthy loan applications and complex lending criteria, which will not bode well in today’s market.
Invoice finance offers businesses the chance to access reliable funding quickly with no long-term commitment. A good solution for the current climate.
The Bounce Back Loan Scheme
The Bounce Back Loan Scheme (BBLS) has a slightly longer deadline than its sister schemes, with a cut-off date set for 4th November.
This will give businesses applying for smaller loans (up to £50,000) a little longer to put forward their applications.
The BBLS was launched to help smaller businesses access funding quickly, and with over a million loans delivered so far it seems to have largely achieved this goal.
Benefits include zero interest for the first 12-months followed by 2.5% yearly interest after that, with no penalties for early repayment. The loans are unsecured and can be used to pay off existing finance.
Regional investment funds
In 2018, the British Business Bank launched a series of regional investment funds aimed at stimulating the economy outside London. These included the Northern Powerhouse Investment Fund, the Midlands Engine Investment Fund and the Cornwall and Isles of Scilly Fund.
The funds are focused on providing small business loans, debt finance and equity finance to businesses which might be excluded from other lending options, with an aim to growing businesses and creating jobs in regional areas.
These funds are currently supported by the European Regional Development Fund (ERDF) and are threatened by Brexit, although in January this year the Government promised to continue supporting the funds in the event of a no-deal.
Investing in regional business and reducing the North-South divide was a key focus for the Government prior to the pandemic, so we can only hope that this commitment will be renewed once the coronavirus schemes close.
Whatever the future holds, it’s essential that business owners keep talking to their brokers and accountants in order to assess the available finance options as we move into the latter part of 2020. If we’ve learned anything this year, it’s that the lending market can change fast in a crisis and keeping up to date is essential.
To learn more about Satago’s flexible invoice finance options, book a consultation with our team today.
