Life After CBILS & BBLS – What’s Next for SME Finance?

For all of us, 2020 has been a year we won’t forget in a hurry. This is especially true for the millions of business owners and SMEs across every sector of the UK economy. 


After enduring the first national lockdown from March until June, the economy partially recovered over the summer as shops, businesses and schools reopened. Despite the initial optimism, however, a second wave began to surge, and on 31st October the Prime Minister announced a second four-week lockdown. Happy Halloween…


The Covid-19 situation has clearly worsened again in recent weeks.  However, much uncertainty remains, as we don’t know: 

  • How severe the current second wave will be.

  • How long the current restrictions will last – will the second national lockdown be extended even further? 

  • Whether new restrictions be introduced through Christmas and into 2021.

  • Whether and when an effective vaccine will become available to the general population.

  • When we will return to a more normal way of life.

  • Whether the government will announce additional support measures for businesses and employees, and what they might look like.

Two of the key government schemes that have provided financial support to companies since the start of the pandemic are the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS).


What is the CBILS?

Introduced when the UK went into the first lockdown in March, the CBILS scheme provides companies with access to various forms of finance. To qualify, companies with an annual turnover of below £45 million must be able to demonstrate that they have been financially affected by coronavirus. 


CBILS enables businesses to borrow up to £5 million, of which 80% of which is guaranteed by the government. One of the biggest benefits of the scheme is that the government will pay all interest and fees for the first 12 months. 


More than 100 lenders have participated in the CBILS scheme, including all of the major banks. And according to HM Treasury, as at 22nd October, £17.2 billion in funding has been provided through CBILS, with just over 73,000 approved facilities averaging £235,000. You can read more about the CBILS scheme here, with more detail on the statistics here.


What is the Bounce Back Loan Scheme (BBLS)?

Launched a month after CBILS in April, Bounce Back Loans are unsecured loans, with terms of up to ten years, for SMEs that have been affected by the pandemic. Businesses can apply to borrow up to £50,000 or 25% of their annual turnover, whichever is smaller. The minimum loan available under the scheme is £2,000. 


As with CBILS, the government will pay the interest and fees for the first year. For the remaining term, businesses make repayments at a low interest rate of up to 2.5% p.a. The government guarantees the entire loan, and loans can be repaid early at any time without penalty.


There are 28 accredited lenders participating in the BBLS scheme, including the UK’s largest banks. Again, according to HM Treasury, as at 22nd October, £40.2 billion in funding has been provided through BBLS, with around 1.3 million approved loans averaging £30,000. You can read more about the BBLS scheme here, with more detail on the statistics here.


Can I still apply under these schemes?

Yes, the application deadline for both CBILS and BBLS has now been extended for a second time, with the latest extensions announced on the day the second national lockdown was announced. Both schemes will now run until 31st January 2021. 


Update: Both CBILS and BBLS have been extended to 31st March 2021. They will be replaced by the Recovery Loan Scheme which will start on 6th April 2021.


Will CBILS and BBLS be available after January?

Currently, both schemes are scheduled to end on 31st January. However, given how fluid the situation is, we all need to keep a close eye on developments. Depending on how effective the second lockdown is in controlling the pandemic, we may see further restrictions imposed on companies. If so, then more government support for businesses and their employees will inevitably follow.  


The furlough scheme is a good case in point. The original furlough scheme was due to end in October, was then replaced by the Job Support Scheme (with different versions for Tier 3 and non-Tier 3 businesses), and now with a new furlough scheme essentially the same as the original one now in place until March 2021.


Where does this leave us?

The only certainty is more uncertainty, so we should all brace ourselves for further changes in the coming months.


How has the commercial finance sector withstood the pandemic?

The effects of Covid-19 on commercial lenders have been far-reaching. Sadly, some lenders have been forced to exit the market entirely, especially those that followed riskier lending models.


For those that remained, many chose to restrict their lending to CBILS and BBLS for a while, which inevitably gives rise to concerns about the availability of commercial finance once those schemes are eventually withdrawn, whether in January or later on.


Whatever happens, there’s no doubt that credit is tighter than it was pre-pandemic. Just as we saw after the global financial crisis of 2008-09, there will be an industry shake-out, with weaker players falling by the wayside.


We expect to see a generally reduced credit appetite from lenders for the foreseeable future, with stricter underwriting, smaller loan sizes and shorter loan terms likely to be the order of the day. 


The current state of play

No one knows better than you exactly what impact coronavirus has had on your business. You don’t need to be in the hospitality or arts sectors to know that the crisis has had devastating consequences. 


Understandably, you might be worried about the uncertain impact of the second lockdown, or what new measures and restrictions may follow it. The bottom line is that there seems to be, for now at least, no clear ‘exit strategy’. Only time will tell how things will look when the second lockdown ends on 2nd December. 


It’s not all doom and gloom, though. Regardless of whether or not the government extends CBILS and BBLS, or announces alternative lending schemes to take their place, commercial finance is still out there and available for the right projects.


So if you’re seeking finance for your business, speak to your accountant, your financial adviser, or commercial finance broker, to explore your options for finding the finance you need.


One thing’s for sure: the demand for commercial finance will be higher than ever, at a time when appetite to lend is going to be lower. It’s therefore vital to be prepared and to give yourself the best possible chance of successfully qualifying for finance. You can find out how to do that by downloading our '10 Tips for Securing Commercial Finance' guide. 


If you'd like to find out more about the latest business recovery loan schemes or need assistance with your application, please get in touch with our expert commercial finance brokers today.


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"Clear Idea Finance" and "Clear Idea" are trading names of Clear Idea Finance Limited, registered in England and Wales, company number 12802771. Registered office address: Saracens House, 25 St Margaret’s Green, Ipswich, Suffolk, IP4 2BN. Clear Idea Finance Limited operates in accordance with the Data Protection Act 1998, ICO registration number ZA798967. A commercial mortgage loan is secured against property, which may be repossessed if you do not keep up your loan repayments. Clear Idea Finance Limited acts as a commercial finance advisor and credit broker and not a lender.