The current government backed loan schemes are due to end on 31 March and despite a past record of extending the expiry and the latest tweaks to the repayment options, it seems the Chancellor is resolved to end these loan schemes at the end of the financial year.
With more than £71bn lent to 1.5m businesses since the schemes' inception in May 2020, it is understandable that the Government might be keen to draw a line under the possible liability.
There is speculation that there will be another, less generous, government backed loan scheme put in its place, built on the old Enterprise Finance Guarantee Scheme. This is where we would put our money if we were betting people. The chances of the government wanting to be seen to be withdrawing all loan support for businesses ahead of any sign of sustained economic recovery are slim.
Outside of government loan schemes, attention will turn back to normal commercial finance. Quite what the lenders' appetite will be for new lending, though, remains to be seen. There aren't any real concerns about the capacity of the major lenders to continue lending, but the stomach for risk when shorn of the government guarantee might be very different, particularly when it concerns those businesses that have taken out a government backed loan, either out of necessity or "just in case". Lenders are going to find it hard to look past the impact on cash flow of the repayments when they have to be made.
What could work in borrowers' favour is that the lenders that haven’t been providing CBILS and BounceBack Loans have seen demand for their products heavily supressed by the availability of government backed loans elsewhere. Those we have spoken to are raring to go with capacity and appetite to spare. Some of the newer "fintech" lenders may find themselves challenged by the limited size of their capital bases and profitability, and we expect many of these to remain selective, often only lending when they can see full security, including directors' guarantees and charges over company assets.
Post CBILS, successful finance strategies for businesses will involve matching the right lending product and the right lender to the specific circumstances, for example: asset finance for investment in vehicles, plant and machinery; invoice finance for working capital; development finance for building projects; VAT funding to spread the cost of quarterly bills. The lenders that have tailored their products and their risk management practices to the purpose for which the borrowing is required will have the best appetites to lend and are likely to represent the best value for borrowers.
Finding the right product and the right lender will, however, require an encyclopaedic knowledge of the market and is not something any business owner can be reasonably expected to have. This, of course, is where we come in. We have built this knowledge over many years and make it our business to add to it everyday.
If you anticipate having any sort of borrowing need over the next 12-24 months, we recommend applying for a government loan while you still can. You can use our instant-checker to find out which type of government loan you will be eligible for. Remember, even if you have a government backed loan already, you may still be able to apply for a top-up.
Unless it is a very basic requirement under the Bounce Back Loan Scheme, please talk to us before applying. Approval of CBILS is by no means guaranteed and the stats show you have a 30% better chance of success with a broker in your corner.
If a government backed loan isn't for you and you would prefer to wait to see how the pandemic unfolds before taking on any further liabilities, please still keep us in mind. We are happy to have informal discussions about medium term financing strategies and how to align them with your business objectives.