Businesses are now faced with challenges they are not familiar with due to the Coronavirus pandemic and most companies are experiencing cash flow problems; thus, they are in need of outside funds to remain functional.
To help businesses get the funds they need the government introduced a new initiative called the Coronavirus Business Interruption Loan Scheme (CBILS).
What is CBILS business funding?
The CBILS is designed to help businesses easily access emergency funding to ease problems with cash flow and sustain business operations as a result of the challenges caused by coronavirus.
Businesses receive loans on attractive terms: no interest attached to the loan for the first 12 months, lenders are banned from requesting personal guarantees on this loan, and the government will cover about 80% security of the lending facility.
Although this new initiative introduced by the government is a good idea, the outcome of this is below expectations. According to reports, only 1.4% of businesses who have an interest in CBILS have been able to secure this loan successfully.
However, suggestions from initial feedback reveals that there are two reasons for this low uptake on Coronavirus Business Interruption Loan by businesses.
The first reason why some businesses are not able to secure this loan is that they fail to meet the borrowing requirements, although the government asked the banks to relax this so it will be easier for companies to access finance during these difficult moments.
The second reason for the low uptake of the CBILS is that some companies lose interest and do not want to continue with the application once they know more about the scheme and how the scheme works.
What are the main problems with CBILS?
The timescales involved in this scheme is one of the problems associated with the CBILS. The application process is not as fast when compared to other funding types available. The demand for this newly introduced initiative by the government is on the high side, causing serious delays, not just in processing the application, but also for company directors seeking prior advice on the scheme.
Most business owners spend hours trying to communicate with an adviser on the phone. Time is of the essence and company directors are more interested in seeking possible ways to keep their company afloat.
When the need for funds becomes obvious, especially in an unprecedented crisis like the coronavirus pandemic, it’s very important to act quickly. However, most companies get to discover that the funds they require from CBILS will take a lot of time before it gets to them.
Do not panic if you are finding it difficult to secure a CBILS loan or because it can take a while to receive the funds. This scheme is not the only way to obtain a business loan, there are other available CBILS loan alternatives that may be more suitable for your business.
Different lenders have different criteria
Even if you are unable to secure a CBILS loan, you can still secure finance from a different source. Every lending facility or provider has their own criteria for lending and are open to accepting different risk levels when granting borrowing is involved.
Some lenders may be concerned with your current trading as well as your future prospect, while others may prioritise established firms with evidence of long and successful trading history. So even when your application is rejected by a high street bank, you could be the best candidate for other niche lenders.
However, you may spend lots of time when drafting multiple applications to different lending bodies, not to forget the frustration associated with the process. It’s advisable to seek help from commercial finance experts in situations like these so they can assist you in securing the funds you need for your business.
A professional commercial finance specialist is already familiar with the different lenders as well as their requirements; thus, they can quickly identify which is more suitable for your business, increasing your success rate to get the funds your business needs on time.
There are many types of finance to think about
There are different types of commercial funding available, from asset and invoice financing options to traditional loans. The right option for you is dependent on factors like the amount you want to borrow, what you want to use the money for, and also the amount to pay back.
If you need funds for your business to buy new equipment or machinery, then you should consider asset finance. On the other hand, if you are experiencing problems with cash flow because your customers cannot pay their invoices when due, then a form of invoice factoring or discounting may be suitable for you.
When you make yourself available to other funding options besides that offered by CBILS, you will likely discover a better and more suitable option that suits your business needs as well as your budget.
Another good idea that will benefit you and your business to contact a funding professional to help narrow the options available and choose the one that suits your company best.
The benefit of choosing the right type of finance
Regardless of the reason why you were not able to secure a CBILS load (you don’t meet the requirement or the loan does not suit your funding needs due to timescales), you can still get the cash you need for your business at the appropriate time when you choose the right form of finance.
It is crucial that you select a product that meets your needs or objectives (both short-term and long-term) when taking out a form of business finance. If you have a temporary need for funding, taking out a long-term loan (which will take you years to settle even when there is no need for funding) is not a good idea.
Therefore, it is vital that you seek professional assistance from a funding expert. Doing this will make sure you choose the best finance option for your business and you get the capital you need promptly.
How can a business finance specialist be of assistance?
An experienced funding expert have access to an established network of lenders; thus, seeking help from one makes the application process easier as they connect you to funding options that are suitable for your business and ensure you receive the necessary funds much faster than if you handled the application process by yourself.
If you need any advice on the above, or anything related, call us for a free, no-obligation, and confidential chat on 0800 975 0380
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