Slower bounce-back
14 July 2021
Introduced as an emergency measure, the Coronavirus Business Interruption Loan Scheme (CBILS) has doubtless provided financial help to many firms impacted by the pandemic. But paradoxically, in some cases it might have led to some facing difficulties in obtaining finance for expansion now.
That’s the experience of one hirer I spoke to whose depots serve one of the UK’s major urban areas.
“The city centre is still suffering at the moment,” he said. “The areas with shops and restaurants have picked up and people in residential properties have been getting work done. But the big offices and commercial premises are still down.
“In many cases the owners are waiting for the banks to loosen restrictions on lending.
“At the beginning of the year, banks knew that many CBILS borrowers would have to start paying them back after the 12-month grace period. I think that, in many cases, they were unsure of the state that some companies’ balance sheets would be in,” he said.
“I talk to MDs and CEOs of construction firms all day long and it’s clear that big projects have been on hold. Banks have said to many customers with CBILS loans that they aren’t able to fund new loans at the same level. So the financial pipeline has been a bit slow.
“I think the situation is easing a bit, following pressure from the central bank and the government to treat the CBILS loans as separate from normal funding.”
CBILS loans carry a government-backed guarantee of 80% on losses that might arise on borrowings of up to £5m.
“A lot of banks were being cautious because they were aware of the remaining 20% amounts owing, but holding the entire 100% against the borrower for future loan requests.
“We’ve had similar conversations with our own banks. We took out a fairly sizeable CBILS loan back in April 2020 because we couldn’t predict what our turnover would be and no-one had any idea what the future held.
“Then earlier this year when the economic picture looked brighter, we talked about more funding to buy much-needed tools and vehicles. But initially the bank said we’d get no more funding until we had paid back the CBILS loan. After much pressure from us, and from other companies like us, the situation seems to be easing.
“But paradoxically, CBILS has led to a slowdown as companies now want to expand.
“We’re hoping that funding for big office blocks and other investment-heavy city projects will get the go-ahead now that Covid restrictions are set to be loosened and people can start getting back into work.”
Picture: Steve Watts/Pixabay
