Commercial
finance and
coronavirus The conversation no one dares speak about WORDS BY DARREN WILLOUGHBY
T
he date is March 24, the time is 11pm and I have just taken my 87th call of the day in relation to the Coronavirus Business Interruption Loan Scheme (CBILS) and I feel compelled to write about my experience. It is clear that we have a huge global and economic crisis on our hands, and the government has announced measures to attempt to keep the economy and businesses afloat in the form of CBILS and bounce back loans. Let’s be clear, in the main, this was a huge lifeline to many genuine businesses that without this intervention simply wouldn’t have survived. The government should be applauded, but how many people saw this as an attempt to get ‘free cash’ or a ‘free hit’? When first interviewed, the amount of clients who didn’t want to give security or explore traditional funding when this was first launched was huge. A multitude of business owners didn’t want to inject their own cash or put up security in supporting their own business – for many a business, this is an extension of themselves is it not? I heard on many occasions that clients would look to fold the business if they didn’t get the support from the government, in effect saying: “I don’t mind losing the government’s money (ie. you the tax payer) but not my own.” The removal of the requirement for personal guarantees only added to this attitude. There were a lot of businesses who weren’t eligible for the scheme. However, there were also many people who intended to try and abuse the system: businesses
28 | NICHE
that were loss making and were going to continue to make a loss, and could not show that they could support the debt pre-coronavirus, let alone post-coronavirus in a probable recession. A business has a responsibility to maintain cash and liquidity. If you’ve had it good in the good times and taken dividends when you’ve had it bad, you have a responsibility to support your own business. A recent survey confirmed only one in seven business owners were injecting their own monies back into a business to support it, according to a press release by the NACFB. Further down the line, now that the business has the money, will they pay it back – and how! A £250k CBILS loan at a rate of 4% over five years would cost a business owner £55,000 pa. Will the business be able to sustain this going forward? If a business is undertaking a ‘cashflow pause or hiatus’ then hopefully it can survive. But how many won’t be able to? And with little or no tie-in from the owner, what would stop them folding the business and walking away with no recourse to the debt?
Bounce back loans
These were designed to help businesses ‘bounce back’ by giving them a temporary shot in the arm in order to assist in cashflow and were very much welcomed by many. They basically gave any business the chance to apply for £50k of lending with pretty much no underwriting and no security, personal guarantee or the ability to prove whether
