Summing up the market from our various conversations with Banks, Finance Houses and Accountants
At the time of writing, more than 300,000 businesses in the UK have benefitted from £14 billion in government backed loans, according to figures released by the Treasury. Specifically, the approved totals for government backed business loans are as follows:
Coronavirus Business Interruption Loan Scheme (CBILS) – 36,000 loans worth more than £6 billion approved from 71,316 applications in total.
Bounce Back Loans – 268,000 loans worth £8.3 billion approved from 363,346 applications in total.
CBILS loans for larger firms – £359 million worth of loans approved, equating to 59 loans approved from 358 applications.
The figures show the Bounce Back loans have been extremely popular with businesses and the success rates on those applications (around 73% so far) far outweigh successful applications for CBILs funding (around 50% success rate). The stats may look encouraging, but figures also released by the Treasury show that over 130,000 businesses may still be in financial limbo either due to applications pending approval or rejected applications.
It must also be noted that a separate corporate finance scheme run by the Bank of England has also arranged borrowing facilities worth £17.7 billion, according to latest figures from banking industry group UK Finance. In total, that equates to just £32.7 billion of the £330 billion promised in government backed loans reaching businesses. Clearly there is much more to be done and plenty of businesses still require financial support and guidance in order to navigate their way through this period.
Chancellor Rishi Sunak also announced this week the extension of the furlough scheme until October.The scheme will continue to run in its current format until the end of July and changes to allow more flexibility will come in from the start of August. More specific details and information around its implementation will be made available by the end of this month, as per the government website.
Elsewhere, we are pleased to see many construction businesses returning to work after seeing the sectors biggest slump in April since records began. Companies including Mace, Taylor Wimpey, Vistry – formerly known as Bovis Homes – and Persimmon all re-opened sites in the past fortnight and we spoke to two construction finance specialists in our network to get their take on the finance options available. Aside from the government funding options previously mentioned, due to the unique nature of the construction sector the non-bank lender market actually offers more flexible funding solutions for contractors and sub-contractors.
Whereas typically bank lenders require certification of payment, crucially some non-bank lenders will release funds when you submit an application for payment. This means you can get that much needed injection of cash into your construction business 30-40 days quicker. Additionally, these lenders will also review your applications on a ‘contract by contract’ basis essentially treating each one as a separate line of funding. Perhaps most importantly, our finance contacts also confirmed you can obtain bad debt protection to safeguard your business from customer insolvency with some lenders, which will be of paramount importance in the current landscape. We have already spoken with several of our clients in the construction sector regarding such funding options, if you would like to get in touch to discuss how these could benefit your business please do so, we’ll be happy to help.
Finally this week, we continued to receive enquiries regarding some of the businesses we currently have for sale. The impact of Covid-19 has led to some understandable uncertainty in the M&A market for anyone looking to buy or indeed sell a business. Of course, there are elements that have become more difficult however there are still opportunities for buyers and sellers in the market. Certainly, having an in-depth due diligence process has become of even greater importance, particularly when considering the supply chain or key contracts a business has in place. We have also had specific discussions around furloughed employees and other measures that have been imposed such as travel restrictions on goods or services offered as well as the impact these have on supply chains. Financial projections and government loans have also been scrutinised as buyers we have spoken to look to get an in-depth understanding on how our clients businesses have been affected.
We still very much expect to broker business sales throughout this period, albeit at a lower volume than usual. We are currently working with clients within the Vegan Food Market, Parking, Print and Agency sectors as well as Manufacturing and Engineering industries. If you would like to discuss a valuation for your business, an exit strategy or business sale or you are looking to make an acquisition, feel free to give us a call.
This weeks advice tips include:
- Although the Government backed funding schemes have been a success for many, just 10% of the allocated funding has so far reached businesses in the 8 weeks since their announcement. If you have yet to take advantage of the support available, speak with your accountant or financial advisor to see which option will be best for your business. As more and more lenders are approved for CBILs and Bounce Back Loans your funding options will improve. We’re happy to help with any financial strategizing you might need.
- We have long championed support networks and membership groups for Directors and CEO’s and whilst this may seem an unnecessary outlay in the current circumstances, the advice and guidance you receive at these meetings is invaluable, particularly in difficult times. Whilst these have always been ‘face to face’ these have now all migrated online with platforms such as Zoom or Microsoft Teams enabling them to continue. Even if now isn’t the right time to join such a network, make sure you are talking to like minded peers and business owners to bounce your ideas off and get that much needed perspective that often only people in the same situation can offer.
- Keep communicating with your team and wider staff. We’re nearly into our 9th week of lockdown measures and if you have furloughed staff, the chances are they will be itching to get back to work too. You’ll need everyone pulling in the same direction and fully motivated on their return. The time away may also have given some of them time to think about their roles and what they can do to improve them and the business as a whole.
- As always, its the same message from us each week; ensure you have a detailed picture of your business and how it has been affected by COVID-19 in place to ensure any funding application is processed quickly: Lending Criteria Tips
Good luck and stay safe, and do let us know if you would like help with any of the above.
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