THRIVE UNDER CBILS

When the UK treasury announced a ￡330bn financial support package back in March 2020 to help the economy recover from the pandemic, business owners were able to apply for funding through a number of government-backed schemes. Although some of the initiatives like the government’s furlough scheme have been praised and extended until March 2021 in light of a persistent virus – there still seems to be some confusion among a few business owners about the purpose of what the Coronavirus Business Interruption Loan Scheme (CBILS) can actually be used for.

The main misconception being CBILS is purely available to offset under-performance or losses brought on by COVID-19. This thinking extends to some advisors, accountants, senior board members, and corporate finance teams – that these loans are aimed solely at firms experiencing cash flow pressures. Whilst this remains to be true, the scheme also takes into account businesses making a turnaround and ready to thrive.

So how could you leverage a CBILS facility?

Chancellor Rishi Sunk made it clear that the initiative was designed to not only support struggling SMEs but also drive businesses towards economic recovery. If that means channeling funds into growth opportunities like technology, marketing, production capacity, land/property purchases, and/or key hires, then that’s absolutely what the scheme can be used for.

CBILS also extends towards growth strategies, including Mergers and Acquisitions (M&A). If businesses are seeking loans to mitigate the impact of Covid-19, plus additional funding to continue implementing M&A plans, they would need a larger amount than mainstream lenders have been willing to provide. This is where alternative debt finance lenders fill the void by offering more substantial sums, at faster and more cost-effective pricing for companies actively looking at acquisition opportunities across various sectors. It proves useful for directors and boards less keen to raise equity at current valuations that may be on the downside as the pandemic persists.

As of December 13th, 2020, nearly 83,000 CBILS facilities have been approved versus 1.4m Bounce Back Loan (BBL) approvals. This may prove that there's still some educating to do with businesses that could further explore their opportunities using asset finance, invoice finance, property finance, and term loans under a CBILS facility before the scheme draws to a close on March 31st. For many who already accessed the BBL scheme, there is now a short window where small businesses can refinance onto a larger CBILS facility to help them absorb further economic shocks and equally take advantage of growth opportunities identified.

It's worth noting that there's still a strong appetite among alternative lenders looking to deploy further funds - Market Finance being one of the countless examples. This comes on the back of ￡50m in fresh capital committed to the lender last quarter from a range of investors led by a global asset manager, Viola Credit. That goes without saying alternative tech-driven lenders are alive and kicking as they aggressively continue to grow their market share within the commercial lending space. They are also continuously proving to be ever more nimble in support of vast swathes of the UK SME community. 

FundingSmiths is an independent credit partner for growth-driven SMEs seeking structured working capital solutions. Our focus is to constantly think ahead and not just settle solving your immediate commercial objectives. So whether you're a serial entrepreneur, a tech-based firm, or a family-run business on a journey towards your next milestone, we would love to hear from you.

Get in touch with us at [email protected]