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Coronavirus: Businesses unable to access government funds

Coronavirus: Businesses unable to access government funds

Authored by Lisa Hogg

Lisa Hogg

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Approximate read time: 2 minutes

Despite the government’s pledge to help businesses struggling with coronavirus-related debt, many have been unable to access funds offered by the Coronavirus Business Interruption Loan Scheme (CBILS).

CBILS was created to allow Small and Medium Enterprises (SMEs) access to funds via various forms of loans and finance, to substitute the stoppage in cash flow caused by social distancing, providing they meet the eligibility criteria.

Chancellor of the Exchequer, Rishi Sunak, announced the scheme as part of the government’s measures to support people and businesses through the crisis:

“I want to reassure every British citizen, this government will give you all the tools you need to get through this. We will support jobs, we will support incomes, we will support businesses, and we will help you protect your loved ones. We will do whatever it takes.”

Why can’t businesses access the funds?

Unfortunately, it would appear the scheme isn’t fool-proof, and many businesses are still seeing their applications denied. According to the British Chambers of Commerce, only 2% of UK firms have successfully secured funding via CBILS, with many struggling with the eligibility criteria, and banks’ insistence on personal guarantees and interest rates.

The problem a lot of small businesses are facing is that banks are still lending in accordance with their pre-lockdown criteria; carrying out credit checks as if it were business as usual. This withholding of funds and reluctance to lend means we could see a rise in the number of small and medium enterprises disappearing in the coming months.

Business Secretary Alok Sharma said:

“It would be completely unacceptable if any banks were unfairly refusing funds to good businesses in financial difficulty.”

However, Royal Bank of Scotland has insisted that funds distributed would increase following recent amendments to the scheme.

What are my options if I’m rejected?

While being rejected for government funding can feel like a major blow to a business, CBILS is not the only option to help with a deficit from the coronavirus. You can still apply for commercial finance without going through CBILS, and if your business is in an insolvent position, you can apply for one of several insolvency procedures to repay your liabilities and return to a profitable position.

In summary

Despite promising to help businesses affected by social distancing via the Coronavirus Business Interruption Loan Scheme (CBILS), many SMEs are unable to access its funds. Rates of lending are far below what the government is aiming for, and the banks’ insistence on sticking to their pre-crisis lending criteria has reduced the amount lent. In response, some banks are looking to address this issue and increase the rate of lending. If you have been turned down for CBILS, or your business isn’t suitable for the scheme, you can still access commercial finance, or insolvency procedures if they would be more fitting for your circumstances.

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