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Author: Sacha Bright & Oliver Murphy
Despite being introduced over a week ago, NextFin has learnt that a number of businesses are struggling to secure government loans to support them through the government-imposed coronavirus lockdown.
It is believed that half of all UK businesses expect to have to furlough at least 50 per cent of their workers in the next week, while a third of all companies plan to temporarily lay off between three-quarters or all of their staff.
According to reports, 62% of companies only have around three months’ funds in reserve and nearly one in five have less than a months’ cash as revenues continue to fall.
According to the Institute of Directors (IoD), not one of its 30,000 affiliated companies has managed to secure one of the government-backed bank loans announced by Chancellor Rishi Sunak.
A poll commissioned by the IoD found that 40% of their members had contacted their bank about an emergency loan, yet none seem to have reached acceptable terms so far.
The Coronavirus Business Interruption Loan Scheme (CBILs) provides financial support through the British Business Bank (BBB) to smaller businesses in the UK that are losing revenue as a result of the coronavirus outbreak. The Scheme is operated through 40 accredited lenders, with up to £5 million permitted per loan.
The Office for National Statistics today published a new fortnightly Business Impact of Covid-19 survey for the period between March 9-22. It showed that of the more than 3,600 businesses which responded, some 45 per cent reported that turnover was 'lower than expected'.
According to Allie Renison - a policy head at the umbrella group for business: “not a single one of our members” had accessed the scheme.
The news comes after businesses had reported that banks have been demanding interest rates, as high as 30 per cent in some instances, and personal guarantees in return for the business interruption loan scheme. Personal guarantees shift the risk from the bank and the government on to the business owner themselves.
However, it's not just businesses that are struggling to access the government-backed loans. According to Peer2Peer Finance News, alternative finance lenders have struggled to access the scheme.
Despite application forms for the CBIL Scheme having been updated, with criteria that appears to have been expanded to take into account P2P lenders, many platforms have experienced delays in having their application processed.
Prospective lenders trying to apply to the scheme are still waiting to start the accreditation process.
According to the BBB, accrediting new lenders was its immediate next priority, adding that the bank has put in place additional resources to assist with processing applications as quickly as possible.
As a result of these reports, the Chancellor is expected to introduce measures to help companies afflicted by coronavirus to get hold of funds through the CBIL Scheme.
The Treasury revealed that it had received more than 130,000 loan requests from companies but fewer than 1,000 had been approved.
Rishi Sunak is now expected to speak to banks with the intention of banning them from asking for personal guarantees, allowing more businesses to access government-backed loans. Previously, these were only available for small businesses that had been refused a commercial loan from their bank.
The changes to the scheme mean that larger businesses with a turnover of up to £500m will also be eligible for more help. The government will now underwrite 80% of loans of up to £25 million that will be on offer to firms with revenues between £45m and £500m.
In a statement, the Chancellor said: “I am taking further action by extending our generous loan scheme so even more businesses can benefit. We have also listened to the concerns of some larger businesses affected by Covid-19 and are announcing new support so that they can benefit too”.
Disclaimer:
To the best of our knowledge, the information we have provided is correct at the time of publishing. SEIS and EIS tax benefits are dependent on your financial circumstances. Sacha Bright is not a solicitor or accountant and we recommend that you seek professional advice on any topic discussed.
Risk Warning:
Investing in equity crowdfunding and early-stage businesses involves high risks, which may include long-term investment horizons, illiquidity, lack of income and potential dilution. Any investor needs to be in the position to afford a total loss of capital invested.
NextFin is targeted at members who have the knowledge and experience to understand these risks and make their own investment decisions. You will NOT invest through NextFin but through the relevant crowdfunding website which also has signed off the content as a Financial Promotion on its own website. NextFin is not the originator of the financial promotions that appear on its site. However, we do to the best of our ability carry out limited compliance checks on the originator and the company seeking funding to ensure they are conforming to FCA regulations and anti-money laundering equity/requirements as appropriate. Business Agent Limited, trading as NextFin, takes no responsibility for this information or for any recommendations or opinions made by the companies or its users. Click here for our full risk warning.
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