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Lancashire Times
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3:04 AM 7th September 2020
business
Opinion

CBILS Scheme Comes To An End And Many SMEs Didn’t Even Get A Look In

 
Ahead of the deadline for applications to the Coronavirus Business Interruption Loan Scheme (CBILS) on 30 September, Greg Taylor, Head of Financial Solutions at MHA MacIntyre Hudson, says many eligible companies can’t 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 30 September and the Chancellor indicated last week 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 can’t find the working capital to fully reopen their businesses, bring people back from furlough and start to recover properly.

The BBB is not fit for purpose and isn’t even a real bank - just a platform for connecting lenders to SMEs..."


Greg aylor
Greg aylor
“For example, the £13.7bn lent through the CBILS scheme to date, which includes an 80% guarantee on loans of up to £5m, 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 £250K that were eligible. In addition, decline rates have been running at about 50% per month since the scheme opened.*

“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 don’t 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). 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 3 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 (BBB). The BBB is not fit for purpose and isn’t 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