With many of our clients experiencing difficulty in accessing funding, we thought we’d share the observations of our CFO, James Parnell.
“I’m hearing and reading similar things that accessing the loans is proving more difficult than everyone hoped for. Privately, I’ve also heard directly from banks that they too are finding it harder than they expected to push loans through the system for their customers (more paperwork and full credit committee still required).
In my view, the best place for people to start is the British Business Bank.
This gives a decent overview of the scheme, who’s eligible with useful fact sheets and so on. It also has links to the 40 accredited banks that are taking part. Clearly, the actual relationship is with the lender and the loan is partially guaranteed by HMG in the event of default by the customer. If there is a default, HMG will guarantee 80% of the lender’s loss after all recoveries – i.e., the banks will ALWAYS lose out on 20% of what they’ve lent if the customer defaults. If a customer has existing borrowing or an overdraft facility, and security is in place already, then even the 20% exposure is proving tricky for some banks. This is why we’re also reading about Personal Guarantees in the press recently.
The other complication is that if a “normal” loan is possible because the business is stronger or has unused security, then the onus is on the bank to lend normally rather than issuing CBILS loans. That naturally will take a bit longer and is likely to annoy customers because then they’re back in for any fees and first 12 months interest (which the Government funds under CBILS)!
So, yes, it’s a fairly muddled landscape. And it’s one that’s changing all the time. Watch this space.”