Dear Readers, I do hope you are well and somehow trying to stay positive! I’ve heard that a positive mind is very good for the immune system.
Recently, we’ve been given details of the Government Business Interruption Loan Scheme, which provides Government backed loans of up to £5m (The link below will give you further details).
I am hearing two viewpoints on this.
The Company Directors assumption following the Chancellors speech;
- “We just need to apply for a loan, sounds very straight forward”
And then the people I have been asking in Banking Circles. They seem to be giving me a more cautious response.
- “The client will need enhanced application process and prove cashflow and business plan forecasts for the 80% PG coverage to apply”
The following is from the link above on the Governments Website
ELIGIBILITY CRITERIA
Smaller businesses from all sectors can apply for the full amount of the facility. To be eligible for a facility under CBILS, an SME must:
- Be UK-based in its business activity, with annual turnover of no more than £45m
- Have a borrowing proposal which, were it not for the current pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty.
I am not being critical in anyway shape or form of the scheme, because I just do not know enough. I am asking your feedback and then I can share this with other businesses, which will help them in how they approach the loan application and to manage expectations.
Now, with regard to Non Government Backed Loans, which I deal with.
The News On The Street About Non Government Backed Loans
I’ve recently heard that three finance companies that deal with SME’s have effectively shut their doors. I had a client receive an offer for 150k. Time passed, and the offer expired. They then asked us to go back and say they would now like to accept. A full application had to go in again to underwriting and the new offer was for a 100k not 150k and the interest rate had gone up by a third (yes, a third)!
Unfortunately, there was nowhere else to go to. We had already chosen the best finance company for their circumstances and industry sector.
We know that there are certain industry sectors that finance companies are not currently interested in helping. Many other sectors are currently under review. We’ve been hearing this from the finance companies for some time now, so unfortunately this doesn’t come as a surprise to me.
Another change we have noticed this week is finance companies are potentially rescinding sooner. Normally when an offer of finance is made, the Directors have time to consider the offer. If they go back within this period, the offer will be honoured. But we’re now hearing of cases where the finance companies also have the chance of rescinding the offer early if it has not already been taken.
We are dealing in fast moving times.
The forward thinking company directors are getting their finance in place, before everyone else.
Very best wishes,
Mark Smillie
0800 612 5364 or 07710 466166