A second wave and a new lockdown - it’s a less-than-ideal scenario. Non-essential businesses have been once again forced to shut their doors for at least 4 weeks, and no-one knows what is on the horizon past that.
With the increased uncertainty, December trading, typically a boom for most businesses, will be different from prior years it is now more important than ever for accountants to be speaking to their clients. Businesses need help preparing and planning and capital advisory is an essential part of that. Especially given that eight out of ten accountants say that their SME clients are unaware of their funding requirements and risks over the next 6 months, according to research done by ACCA UK and the CFN.
Avoid the last minute rush
Thankfully the government has extended the Coronavirus Business Interruptions Loan Scheme (CBILS) application deadline to the 31st of January, but this does not mean businesses should be using this as a target date, especially given that it’s also the self assessment deadline. In the leadup to the original September cut-off time lenders were inundated with applications and turnaround times moved from days to weeks. We still have not seen this normalise, and the general sentiment is that this will continue to be the case, especially given most people will be taking time off in December.
There are many businesses who have benefited from the British Business Bank schemes already but plenty more who are yet to take advantage . To give you some context, there are an estimated 5.9 million small businesses in the UK, with only around 73,000 of them having taken CBILS lending thus far, and just over 1.3 million that have taken Bounce Back Loans (BBLs). The average size of a Bounce Back Loan is £29,000, less than the average salary of one business director.This means there are still almost 5 million businesses who have not benefited from any type of government funding as of yet.
Help clients plan ahead
As accountants, you are best placed to consult your clients on the range of capital products available to them, especially given that 80% of businesses apply to just one lender, their bank. At Capitalise we have access to over 30 of the accredited CBILS lenders, and we are here to support you in helping your clients. We have successfully secured offers on over 70% of the applications we have released to lenders, and we will continue to work hard to ensure businesses have access to the capital they need.
To help you out we have put together this guide of the most important CBILS information to help your conversations with clients:
Important Dates
- Applications close: January 31th 2021
Benefits of CBILS
- Borrow anywhere from £50,001- £5,000,000
- No repayments for the first 12 months
- All fees covered by the government
- No interest payable for the first 12 months
- Maximum borrowing of 25% of 2019 turnover
- No personal guarantees up to £250k (multiple loans can be taken across different providers)
- Cheaper rates than have been historically available
- Refinancing of Bounce Back Loans for larger quantums
Types of funding available
- Term Loans
- Asset finance
- Invoice Finance
- Property Finance
- Refinancing of existing debt
Eligibility Criteria For Businesses
- UK-based in its business trading activity
- Have an annual turnover of no more than £45 million
- Have a borrowing proposal which the lender would consider viable, were it not for the current pandemic
- Self-certify that it has been adversely impacted by the coronavirus (COVID-19)
- Not have been classed as a “business in difficulty” on 31 December 2019 (loss making)
Typical Information Required
Lenders will sometimes ask for additional information; however, it is always good to collect the below initially when preparing applications.
- Loan amount, purpose, and term
- A short paragraph on the business background and how it has been impacted by Covid-19
- Last 2 full sets of filed accounts
- Bank statements covering November 2019-present (PDF format & no older than 7 days)
- Shareholder details
- Up to date management accounts
- Current debt position
Tier 1 banks will generally ask for the following as well:
- Aged debtor and creditors list
- Cash flow forecasts
Questions to consider when speaking to clients
If the answer is yes to any of the questions below, it is worth having a separate conversation to find out if your client should apply or not.
- Have you been declined by your bank for a CBILS loan?
- Have you taken a bounce back loan? If so, will the amount received be enough to get you through the next 12 months?
- Do you have historic debt over a year old?
- Have you ever financed any of the assets on your balance sheet?
- Do you have lengthy payment terms with some debtors?
- If you were to experience a business shock (ie a large unpaid invoice, another lockdown, breakdown of plant machinery) do you have enough cash to survive this?
- If you have deferred payments (ie VAT, suppliers etc) do you have enough to cover these costs?
- Have you taken a CBILS loan of £250k but need more?
At Capitalise we have access to over 30 of the accredited CBILS lenders, and we are here to support you in helping your clients. With the deadline fast approaching, now is the time to be assisting your clients in planning for the future #leavenobusinessbehind.
