Details are emerging regarding the detailed criteria which accredited funders will use when evaluating applications for the Coronavirus Business Interruption Loan Scheme (CBILS).
Although the current circumstances are extreme, businesses wanting to secure a loan from their bank or through CIBLS should still take a reasoned approach and be prepared. The first port of call should be to speak to your bank relationship manager who will discuss your request and set out what is needed.
Information you might need
1. How were you trading before the crisis? Have you got up to date and accurate management information?
2. How has the crisis affected your business? What has happened?
3. What mitigating action have you taken so far? What costs have you cut? Have you taken advantage of the furlough scheme?
4. What else could you do?
5. What will your market be like post-crisis? Will it return to its former levels and how long will it take?
6. Have you prepared short-term cash flow forecasts and longer-term financial projections? Have you got current debtors and creditor lists?
You won’t be expected to predict the future but if you have prepared a well thought out and reasoned case you are more likely to be successful.
How will the bank assess your business?
Likely questions the bank will ask itself are:
1. Would we have lent to this business pre-crisis?
2. What is the long-term impact of the crisis on the sector?
3. Does the management team have the skills and experience to navigate their way out of the crisis?
Other things you could do
1. Seek capital repayment holidays on existing debt and/or a temporary overdraft increase.
2. Get your bank to temporarily waive financial covenants on existing lending.
3. See if your existing lender has any unused security and get them to take that into account or release it so you can approach additional lenders.
PLEASE NOTE – NOT EVERY BUSINESS WILL BE SUCCESSFUL BUT PREPARING YOUR CASE PROPERLY SHOULD INCREASE YOUR CHANCES.
Key points to consider
Much has been written about the speed at which lenders are processing applications for CIBLS.
The reality is that any loan application still must be subject to a credit approval procedure which unfortunately does take some time. Imagine a scenario in which each relationship manager has perhaps up to 20 applications to assess and process from their existing client base. It might take the best part of a day to assess and process each application and then it must go to credit for approval or otherwise.
Clearly, those with the most pressing need will be prioritised meaning those with the resources to last a few months will wait longer for approval.
If businesses are considering an application, then they should prepare and submit it in good time because it is inevitable that there might be a queue.
– Be on top of your management accounts. You will need to prove viability before coronavirus.
– Have the narrative ready for how your business has been affected and how you envisage recovering post crisis.
– Prepare supporting forecasts.
– Talk to your relationship manager sooner rather than later.
If your bank isn’t on the approved list of CIBLS lenders, talk to other approved lenders, including the alternatives to the main banks, and anticipate that it might take longer because they will not know your business. Be aware that alternative funders will be more expensive than the main banks, but access to the cash may be more important than securing the cheapest deal.
And it is OK to apply to multiple lenders at the same time.
PM+M has specialist teams able to assist you with the above. We also have devised a number of other useful blogs to help with short term planning and changes you may need to make to your business due to the impact of Covid-19.
Visit our hub for the latest information and government guidance or for a more detailed discussion on any of the points raised above, please contact Jim Akrill using the button below.
This information is correct as of 27 March 2020. This blog is for general guidance only. Recipients should not act upon any of the information provided without seeking specific professional advice tailored to your circumstances, requirements or needs. Please contact PM+M before making any decisions based on any matters relating to this blog.