Since its inception in April 2020, the Coronavirus Business Interruption Loan Scheme (“CBILS”) has provided much needed support to businesses that have been hit hard by the pandemic.
Here, Jon Connor, who leads the PM+M funding team, discusses why it is important not to dismiss the scheme as a valuable funding tool for your business, even if you are currently financially stable and managing through the pandemic.
A key question we want to ask you: What would you do if you lost your largest customer?
Under the current economic climate, one of the first things we ask our clients is whether they would be able to survive the pandemic in the worst-case scenario, and to consider putting contingency plans in place to deal with any unexpected hurdles. We ask them to imagine the hypothetical situation: would they would be able to continue trading if they lost their biggest customer? Often the answer is no; the loss in revenue would see such disruption to their cashflow that the chances of survival would be limited.
When we ask business owners about what plans they have in place to deal with such scenarios, we are surprised to hear that in most cases, a CIBLS loan doesn’t make it onto the ‘back-up plan’ list, often citing the risks involved in applying for the loan as the reason it hasn’t been considered.
However, it could be worthwhile applying for a CBILS facility and putting it on deposit. If the loan isn’t required at this point in time, that’s an added bonus – you can pay it back before the end of month 12 with no cost or risk incurred, yet you have the reassurance that you could manage cashflow and continue to trade, should your worst-case scenario happen. Put in simple terms, in this situation, a CBILS loan would act as a no-cost insurance policy for your business as you navigate through the pandemic.
Not just ‘standard’ term loans
There are several products available under CIBLS; some loans are secured on invoices, some on property, some completely unsecured. They come with a range of benefits that are rarely available with normal commercial lending, such as:
- No repayments for the first 12 months
- All fees covered by the Government
- No interest payable for the first 12 months
The maximum borrowing available under CBILS is 25% of turnover or 2x annual wage costs, and it’s worth being aware that multiple loans can be taken from different providers.
Better business decisions
From our experience, we have found that business leaders have greater clarity when they have surplus cash reserves. They can make business decisions based purely upon their commercial judgement, rather than having to be led by liquidity concerns.
Having cash in reserves, even if it is in the form of CIBLS, allows those responsible for the business to concentrate on driving the organisation forward as we hopefully make our way out of the current economic crisis.
The CBILS deadline is fast approaching
Although the Government has extended the application deadline to 31 March 2021, March will be here before we know it(!), so make sure you act quickly if you’re interested in applying. PM+M has access to 30 CBILS accredited lenders through our relationship with Capitalise, including banks and lenders who aren’t on the high street, plus a much wider panel of commercial lenders for non-CBILS facilities.
Furthermore, submitting a CBILS application via Capitalise may actually help you access the scheme with a higher chance of being accepted (Capitalise’s average acceptance rate for CBILS is 80%, compared to an average acceptance rate of just 50% for the scheme in general).
A CBILS loan could be the right option for you
Whilst we continue to navigate the unpredictable COVID-19 pandemic, it makes sense to consider a CBILS loan as part of your contingency planning (especially as there is no interest to pay if the loan is repaid within the first 12 months). Businesses that are aware and make use of the support available to them will be in the best position to make sure their balance sheet looks healthy and can ultimately emerge from the pandemic stronger than ever.
As mentioned, the PM+M team have access to over 30 accredited CBILS lenders via our partnership with Capitalise, who can make the application process quick and simple. We will guide you through the best options for your business and make the right introductions, at the right time. For more information, please get in touch at funding@pmm.co.uk and a member of our team will be on hand to assist you, or alternatively email me using the button below for a discussion tailored to your situation.
This information is correct as of 18 December 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.
