COVID Loans – Help or Hindrance?

Well – I think there is little doubt they have been a huge help for many businesses who simply would not have made it through without one.

According to British Business Bank, £79.3bn of Loans have been made to 1.67m businesses across Bounce Back Loans, CBILS and CLBILS – of which £26.4bn were CBILS (across 109,877 separate loans – averaging out at roughly £240K each).

Roughly 1/3^rd of all Loans have been taken by businesses based in London & the South East, with a further 11% of Loans taken by businesses in the North West of England – who were the next largest participants on a regional basis.

It is also interesting to note that £12.4bn of all Loans taken nationally are supporting businesses in the Wholesale and Retail sectors – with the High Street now hopefully starting to recover and, in turn, seeing their Supply Chain coming back into play.

So, what next?

In many cases the CBILS Lender has provided a Loan and taken security over the Company (such as a Debenture), which ties up the company assets to that lender and it will be interesting to see what happens when the same business is now looking for extra funding to support their Working Capital requirements moving forward?

How many of those Lenders who have taken a Debenture will be prepared to extend themselves further and provide additional or complimentary funding lines without the support of the Government backed schemes?

And how many of them will be prepared to grant Security to another lender who can come in and assist with the “in life” working capital requirements now these businesses are looking to grow again?

It remains to be seen whether taking a CBILS for some SME’s has helped in the short term but maybe hampered them in the long term as they now seek this additional assistance as they try to take their business forward again.

Let’s hope common sense prevails and the CBIL providers do agree to work alongside other lenders who will be able to help these businesses thrive again.

Or maybe the Government / British Business Bank will take a look at the intended spirit of these Loans, where they have provided 80% support to the lenders, and realise there may be another issue to sort out if good businesses who took CBILS Loans but had to provide a Debenture are to be allowed to breathe and grow again.

Interesting days ahead for sure.

Vince Tovey – Managing Director