What are your alternatives if you cannot get a CBILS loan?

Published: 20th April 2020

As the Covid-19 pandemic threatens to hinder businesses across the country, the government has announced an unprecedented support package to help companies and their shareholders survive these challenging times.

One of these measures is the Coronavirus Business Interruption Loan Scheme – or CBILS – which initially appeared to provide the financial lifeline businesses up and down the country desperately needed.

What is the Coronavirus Business Interruption Loan Scheme (CBILS)?

The scheme was designed to keep businesses afloat while government-enforced lockdown measures are in effect, with the hope that these businesses – and therefore he economy – can bounce back quickly once these restrictions are eventually lifted.

CBILS loans are offered with a host of attractive terms. Not only are they provided interest-free for the first 12 months, but as an added bonus, lenders are not able to ask borrowers to provide a personal guarantee for loans under £250,000; instead the government will underwrite these loans to give security to the banks.

What if your CBILS application has been rejected?

Despite the government’s promise that banks would apply a less stringent set of affordability checks to these loans, thereby opening borrowing up to companies who would not otherwise qualify for a loan, a huge number of businesses have still found themselves being turned down when applying for a CBILS loan.

One of the terms which is so attractive to directors – namely that banks cannot request a personal guarantee for smaller loans – appears to be a sticking point when it comes to lenders approving applications. Although the government have confirmed that they will provide security equal to 80% of the loan amount should be banks suffer losses, many lenders are still being extremely wary of who they are lending to.

Banks are granting loans through this scheme on the proviso that these companies can show that they are viable. If businesses cannot prove that their finances were healthy before the coronavirus crisis and demonstrate how the company will continue to be viable after lockdown restrictions are lifted, they are finding themselves being refused CBILS loans.

This is leading to many businesses who were counting on securing a funding through the CBILS, missing out on this vital lifeline and left pondering where to go from here.

What if CBILS is not the right option for your business?

For others, a loan through the CBILS is simply unsuitable to the needs of the business. While the scheme does come with a number of attractive terms, for some businesses these do not outweigh the need for an alternative finance product.

Once the scheme was opened up for applications from interested businesses, the limitations were quickly realised. As many businesses are struggling to manage cash flow during these times, the demand for the scheme was vast, causing huge delays on the phones.

During the current situation, more so than at any other time, once a business owner identifies the need for finance, this isn’t something which can wait. Indeed, for many the need for a capital injection is immediate if the future of the business is to be protected. Having to wait several days to even speak to someone to ascertain whether the scheme could be an option, is simply not a viable plan for many.

With the CBILS scheme ruled out as an option, what should business owners do next?

What are the alternatives to a CBILS loan?

While the CBILS may not have lived up to its promise for manty directors, the good news is that there are alternative ways of introducing money into your business – and quickly.

Although loans obtained through CBILS do come with some value-added benefits attached, if you cannot get this money into your business quickly enough, or if the banks are not willing to lend to you under these terms, then these benefits become less enticing.

 Just because your application for funding through CBILS has been turned down, does not mean your need for finance has gone away nor does it mean the end of your chances to secure this funding.

There are scores of lenders out there, all with different lending criteria; the key is finding one who best meets your borrowing requirements.

What it comes to finance, one size does not fit all

When it comes to sourcing funding your business it is important to bear in mind what the money will be used for and ensure you choose the most appropriate funding type possible. A traditional loan may be great for easing general cash flow worries; however, it may not be the best way of funding a one-off purchase such as a specific piece of equipment, machinery, or other business asset.

Furthermore, there are a range of commercial finance products you may be less familiar with which may well be a better solution to your business’ money worries. For instance, invoice financing products – which includes invoice factoring and invoice discounting – are utilised by companies who often find themselves dealing with clients who operate under lengthy payment terms, or within industries where late payment of invoices is prevalent. Invoice financing allows businesses to access a percentage of their unpaid invoices as soon as they have been issued, giving cash flow an immediate boost as well as providing certainty to directors during these uncertain times.

Rejected for CBILS? All hope is not lost

A CBILS rejection does not mean you will not get funding elsewhere. Every lender has their own bespoke lending criteria which determines who they will and will not loan money to.

Some lenders will be more risk-adverse than others, requiring proof of a long and profitable trading history before agreeing to lending. Others will be more open to offering finance to newer companies or those which are yet to turn a substantial profit; these lenders typically assess businesses on a case by case basis rather than through a set criteria which cannot be deviated away from.

For some lenders, profit is not everything, particularly if you are able to put up collateral as security for the proposed borrowing. For example, while you may currently be struggling with cash flow, if your company has a number of valuable assets you could consider raising money against these as an alternative to a traditional loan.

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The benefits of using a commercial finance expert

Navigating the commercial finance market can be difficult at the best of times, however, the acute need for funding during the current coronavirus crisis has made the situation even more tricky. If you are struggling to secure the funding you need, speaking to a business finance expert, such as UK Business Finance, could make all the difference.

With an established network of lenders, they will know who is most likely to lend to your company, cutting down on the number of applications while maximising your chances of success. Enlisting the help of a professional commercial finance introducer could save you a huge amount of time while also ensuring you are getting the best rate possible, saving you money both now and also over the length of the borrowing. Once you have accepted a quote then you can typically expect to receive the money in your account within 24-48 hours, much quicker than the CBILS application process.

The experts at UK Business Finance will also be able to look at your existing financial obligations and will advise on whether there is the opportunity to refinance existing debt in order to bring your costs down.

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