CBILS: Many SMEs have not even had a look in

Sep 13, 2020

Ahead of the deadline for applications to the Coronavirus Business Interruption Loan Scheme on September 30, Greg Taylor, Head of Financial Solutions at MHA MacIntyre Hudson, says many eligible companies cannot access CBILS funding and the government needs to act urgently to shore up liquidity among banks and other lenders so SMEs can make the most out of the recovery.

THE APPLICATION deadline for CBILS is September 30 and the Chancellor, Rishi Sunak, has indicated that the scheme is unlikely to be extended.

For some companies CBILS has been a lifeline but the scheme, as well as the credit criteria used by banks and lenders, has been quite conservative. Currently many SMEs cannot find the working capital to fully reopen their businesses, bring people back from furlough and start to recover properly.

For example, the £13.7 billion lent through the CBILS scheme to date, which includes an 80% guarantee on loans of up to £5 million, has been taken up by just 122,885 UK SMEs out of a potential field of nearly 790,000 businesses with a turnover of more than £250,000 that were eligible.

In addition, decline rates have been running at about 50% per month since the scheme opened.*

Greg Taylor, head of financial solutions at MHA Macintyre Hudson

What the government must do now is take creative action to ensure there is strong liquidity within the finance sector to unlock lending for good SMEs. This is a particular concern with fintech lenders and challenger banks, as we do not want to see a raft of these financial institutions failing and bringing about a wider crisis within SME lending. 

As an urgent first step the Bank of England needs to reactivate its contingent term repo facility. CTRF is an unlimited and cheap source of funding for commercial banks that desperately need cash. It was originally activated in late March 2020 and ran for three months.

It is time to open it again but this time the government should broaden its remit to include other lenders like fintechs and challenger banks. 

We also need to replace or refashion the British Business Bank. The BBB is not fit for purpose and is not even a real bank – just a platform for connecting lenders to SMEs.

We need a bank prepared to back deserving companies over the long term and that is free from ordinary shareholders with vested interests.

The government could invest in a new bank directly, or, if funds are to be raised from private investors, they should be in the form of bonds or other instruments that insulate the bank from short-term pressures.

Staff should have expertise in specific business sectors so they have the confidence to make a judgment call about a company’s prospects for long-term success. 

*HM Treasury CBILS statistics, as of 16 August 2020 

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