The Complete Guide to CBILS for Asset Finance Businesses

QV Team| 05 May 2020

SMEs across the country are struggling with the financial impact of COVID-19. Consumers are reducing spending, ‘non essential’ industries are shut down and invoices payment times have stretched from 30 days to 45. Given that SMEs make up 99% of UK businesses, the government has taken significant steps to support them.

Alongside relief from various payments, the chief support is through the Coronavirus Business Interruption Loan Scheme or CBILS, which aims to provide emergency funding for businesses in need. However, just a few weeks after its announcement there are signs that the scheme hasn’t achieved its initial aims. 

As the government reviews their strategy, there is an opportunity for asset finance businesses to step up and make a real difference for the country’s small businesses. Here’s what asset finance businesses need to know about CBILS.

Understanding CBILS

CBILS is designed to expand access to capital for SMEs by providing lenders with a government-backed guarantee. In principle, this would allow lenders to work with businesses that might not have otherwise been eligible for a loan.

UK businesses with revenues of less than £45m can apply for loans of up to £5m, providing they can offer a proposal that a bank:

  • Would consider viable, were it not for the Covid-19 pandemic

  • Believes will enable the firm to trade out of any short-term to medium-term difficulty

The scheme has also been expanded to include bigger companies with turnover of between £45m-£500m that want to borrow up to £25m. Under CBILS the government guarantees 80% of the value of the loan while also covering the first 12 months of interest payments and fees.

CBILS debuted with 40 approved lenders, mainly traditional banks and lenders, with more recent additions including The Co-operative Bank, Cynergy Bank, OakNorth Bank and Starling Bank.

Progress so far

While the scheme was initially welcomed by the business community, the rollout has been challenging, resulting in several overhauls by the Treasury.

The primary difficulty is that very few of the businesses that have applied for loans have managed to secure one. The government has admitted that just 1.4% of SMEs that enquired about its coronavirus business interruption loan scheme have so far been successful. That is just 4,200 out of an estimated 300,000 firms that sought help.

Banks have also been criticised for asking for steep personal guarantees and seeking interest rates between 7% and 12%. On April 3rd the Chancellor loosened the criteria for CBILS loans and banned banks from asking for personal guarantees to try and boost uptake.

The slow progress so far is being blamed on a lack of available bank staff, as well as slow approval processes from lenders.

 

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How Alternative Lenders are Meeting the Challenge

The initial stages of CBILS have focused on delivering finance through traditional lenders, in spite of the fact that alternative finance has grown significantly since 2008. Various industry bodies have now called on the government to expand their support for alternative lenders.

The slow response of banks has inspired other finance providers to create services, such as Santander-backed fintech Ebury, counting on their improved technology to process large volumes of loan requests digitally.

Asset finance is also an area of interest, with several finance providers expanding their asset financing services, or creating one from scratch. For businesses undergoing a shift in operations, asset financing can increase access to essential equipment quickly, without the need for capital upfront and unlock the value in stagnant assets to service short term costs.

Adapting Your Services

In order to effectively support businesses, asset finance brokers will need to think strategically about how they offer their services. The median average of SMEs hold 27 days cash buffer in reserve and 25% hold just 13 days and this was before unprecedented economic strains from the pandemic. This means that speed is now crucial for helping SMEs through this crisis.

Technology is essential for accelerating up the lending process. QV Systems’ asset finance platform gives you all the tools you need to manage large volumes of applications quickly and efficiently while also providing a tailored service to your customers.

  • Maximise choice and flexibility with built-in soft search functionality 

  • Centralise your deal management, with our broker-specific CRM tools

  • Speed up underwriting with easy platform-based communication

  • Our smart pricing and calculations engine saves time for your customers and your team finding the right deal

  • Balance proposals and live deals in once place as you send options to funders.

Our in-house experts work with your team to integrate new technology into your business quickly and effectively, so you can focus on helping more customers, quickly.

Making a difference for SMEs

While CBILS has taken steps to expand access to capital, there remains a huge amount to be done and time is of the essence. 

Asset finance brokers have a huge opportunity to support the nation’s SMEs through this difficult time with the right tools and support. Our team is ready to help you build your CBILS strategy with advice, technology and support. Get in touch today to find out how you can position your business to support SMEs when they need it most.

 
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