Wanna borrow some money……..it’s common sense really.

When the government stepped in 2-3 weeks ago to offer their support to small businesses through the Coronavirus Business Interruption Loan Scheme (CBILS), this along with the other measures was an unprecedented move and one that a great many people were thankful for.  Sadly, it’s not for everyone and there are many businesses that cannot be supported and it’s important that potential borrowers understand this. Most banks are being hammered at the moment with both an onslaught of applications as well as a wave of negativity for unsuccessful loan applications and misdirection. This is not their fault.

CBILS is very similar to the Enterprise Finance Guarantee (EFG) which has been around for over 10 years since the last downturn. It is important that anyone looking to borrow money understands the basic principle of a loan, which is this……..a lender will lend money, but they do want it back from the person they lent it to and they will risk assess you. The banks are naturally cautious through experiences of the 2008 crashes which was principally due to sub standard loans and their own recklessness in lending.

Every business leader should understand that banks will only lend to businesses with a good track record and sound business proposal. Every legitimate bank is legally bound by Basel III to ensure they lend sensibly. The CBILS loan does include an 80% guarantor level from the government and there are no personal guarantees required upto ￡250k in most cases and a decision can be expedited quite quickly if you approach this correctly and on an informed basis. However, this is not free money and the borrower is still liable.

Borrowing rules are quite simple and as a rule of thumb, consider asking yourself or your friends to lend you the money if it was possible; would you and why would you agree to? You need a decent underlying business to start with and solid prospects of future success. If you have lost all of your income, how can you possibly begin to think about repaying back a loan that is designed to replace it. When reviewing your options, do not lose sight of common sense and read the qualifying criteria first. Blind optimism is not enough.

At a high level, if you want a CBILS loan, you will most likely have to apply online via a bank portal (HSBC launched theirs this week) and provide the following (as you would in any normal circumstances)

1.   up to 3 years P&L, balance sheet & cashflow forecasts

2.   12 months of historic management accounts (P&L) and trading history

3.   A proposal to demonstrate that you have a decent underlying business

4.   Demonstrate an immediate drop in revenues from your historic position

5.   Already considered/taken advantage of the full range of the government relief package: VAT deferment, Rate relief, Time to Pay for PAYE, NI, Corp Tax, Staff furloughing etc.

6.   A small point to note is that some banks may also require direct access to your accounting package (not your accountant) and will pull out the actual historic P&L and trading data from your accounts system to verify the validity of your historic trading data. Makes sure your data is accurate!!

There are very few guarantees in life and there is no assurance that you will be successful in your application for CBILS, but there is a great deal out there to help you in your time of need. I am getting daily calls from businesses who want help to understand this and help to put a plan together…….I am happy to help, so please send me a message if you want some help or even a little rant……I’d be happy to listen and to chat.