How business interruption loans are helping SMEs to bounce back

The Coronavirus Business Interruption Loan Scheme (CBILS) is intended to support the continued provision of finance to SMEs in the UK during COVID-19. Under the scheme, the Government guarantees 80% of the finance to the lender, and will pay interest and fees for the first 12 months. To be eligible, businesses must have an annual turnover of up to £45 million, and be able to show that their business would be viable if it were not for the pandemic.

Over 60 British business banks have been accredited as lenders, which are able to provide facilities of up to £5m to smaller businesses which are experiencing lost or deferred revenues that have interrupted their cash flow.

The scheme is part of the Government’s support package to ensure that SMEs can access necessary funding to keep them afloat during the pandemic.

“CBILS is ideal for food businesses that are experiencing lost or deferred revenues, leading to disruptions to their cash flow as a result of COVID-19,” explained David Castling, director of intermediary lending at Atom Bank. ‘The first 12 months of CBILS lending is interest-free – attractive for businesses in a sector that will likely take longer to rebound in line with consumer confidence.”

“The majority of quotes/loans going through are based on the capital projections for the next 18 months,” David added. “This means businesses are looking at finance that will buy them time and see them through the next period of uncertainty with the hope of returning to some kind of normal (normalish) trading behaviour next year but heavily dependent on lockdown rules. The cash made available is being used for everything from refinancing existing debt to bring payments down and aid affordability, to wages, rent, stock and in some cases expansion.

“The challenges in the food market have some common themes, but equally the challenges of an independent retailer will definitely be nuanced from a manufacturer. CBILS can provide affordable loans for good businesses that would be thriving under normal, non-COVID-19 conditions. We know that those in front-end food and hospitality are effectively closed, and even when open will most likely have to work in such a reduced capacity that financially their previous commercial model may not be viable.

“How many pubs/restaurants/cafés will be able to make it on one-third of their normal customer bases if two-metre social distancing remains in force? For businesses to survive, they will need to adapt, and in order to adapt, this can cost money – and that’s where initiatives such as CBILS come in.

“The key things we will likely see are businesses being inefficient (probably for quite some time); fewer staff; fewer customers (in some scenarios); increased costs and things generally just taking longer to do than they used to.”

Find out more about CBILS and how Atom can support your business here