Over the past 10 days, I have interviewed around two dozen entrepreneurs about their CBILS experiences and also spoken with senior bankers from several high street banks. Everyone was promised anonymity in return for giving me the full story of CBILS from their perspective.
Let’s start with the banks
Banks have taken a great deal of stick from the media. Some of that is no doubt deserved, but having spoken with several senior bankers, I also understand the logistical challenges they have been facing. At the risk of sounding like I’m on the side of the banks, let me explain what has been happening.
Following the financial crash in the late noughties and the subsequent bail-out and significant state ownership in RBS and Lloyds – the former is still 62.4% owned by the UK government – there was an overdue tightening of regulation on the banks by the Financial Conduct Authority (FCA). Things became significantly more process and system based, and the whole infrastructure was designed around three routes into your bank: in branch, via dedicated call centres and online.
With lockdown, suddenly the banks found the majority of their staff sent to work from home as access to the branches was severely curtailed, and call centres in the UK and overseas were shut because of lockdown and social distancing rules. Online was not so affected and there is no question the banks could have moved faster than they did to put CBILS applications online. In the first week following the Chancellor’s announcement of CBILS, I went to the websites of all the high street banks. Some had CBILS very clearly on their home page; others I had to go searching to find anything CBILS related. One of the bank websites said there was no online access and told customers to call a particular number. I heard from several entrepreneurs that they spent as long as 5 or 6 hours waiting to get through, only to be told by the person on the other end that they didn’t know much about the scheme. Bit of an own goal by the banks on that.
The real challenge the banks faced was ensuring appropriate security given that the majority of their staff were now working from home. All of their IT systems were branch or call centre based and the majority of staff don’t have a bank laptop to take home. They were left in a situation where staff were using a personal machine – whether a shiny new iPad, a 5-year old Dell desktop or whatever – to try and access the bank’s secured network using a personal broadband line from TalkTalk, Sky or Virgin. Not really up to scratch in terms of the FCA’s security standards.
Those logistical challenges have been addressed and for the most part resolved, and it seems that the taps are beginning to open. Even if still very slowly.
Whilst I understand the situation the banks found themselves in, and I have a degree of sympathy for the challenges they faced, let’s not kid ourselves. CBILS is all about protecting entrepreneurial businesses during this crisis. Having founded and co-founded several businesses myself, and having worked exclusively with entrepreneurs since 2002, I am firmly in the entrepreneur camp.
The story from the entrepreneurs’ perspective
The good news is, most of the entrepreneurs I’ve spoken with have now received approval for their CBILS facility. It’s been quite a mixed bag of experiences though, particularly for those who came out of the blocks fast and applied for a CBILS facility within the first few days. The banks just weren’t ready for this and quite a few were initially turned down.
However, we entrepreneurs are a resilient lot who don’t just take no for an answer. Some senior banking contacts hinted to me that the Chancellor had been raking the CEOs and boards of the banks over the proverbial coals because of the time it was taking to get things going. That, together with the Chancellor’s announcement on 2 April that the banks could not take personal guarantees on facilities of less than £250,000, saw things start to move more quickly. Statistics published by UK Finance (https://www.ukfinance.org.uk) show:
- By 6 April, almost 3 weeks after CBILS was announced, just £453 million of loans had been approved
- By 15 April, the figure was up to £1.1 billion approved for 6,000 businesses
- By 21 April it had grown to £2.8 billion approved for 16,000 businesses
Apparently, there have been just 36,000 applications so far. When you consider that there are 5.8 million businesses in the UK that have between 1-250 employees (micro, small and medium by the official definition) that’s less than 1% of businesses applying. There is still a huge opportunity for entrepreneurs to get access to significant sums of capital at rates that are, as you’ll see below, incredibly attractive. Don’t miss this “once in a lifetime” opportunity.
It’s happening. We just need to follow that World War II mantra: Keep calm and carry on.
So, what’s it been like on the front lines? Rather than telling all of the stories, I’ve decided to group things by bank and give a few examples, so that readers quickly can find out what is relevant for them and their bank.
As the government owned bank, there’s no surprise to see that RBS/NatWest have been the most responsive and generally offer attractive deals.
One person approached their relationship manager on the second or third day and they immediately agreed a £20K overdraft just to tide things over whilst they went through the application process. They then had to produce a detailed cash projection over the next 12 months, including all known income, expenses and equipment costs (this business requires a fair amount of capital expenditure). In the end, RBS approved a £154K facility at 3.24% repayable over 6 years.
Another entrepreneur didn’t have a relationship manager at NatWest so had to go through their online portal. Initially she had to answer four questions to demonstrate that she qualified. It then took 11 days before she received the application form, during which time she was updating her business plan and projections. She applied for 6 months’ worth of expenses. The bank cut that back to three and would not cover the cost of staff who were still working on the basis that they should be generating profits. In the end she secured £56K at 5.9% on a 6 year term.
Another has been a customer of NatWest for 20 years. He already has £200K of loans on his business. Initially, NatWest told him that he wasn’t eligible for a CBILS loan. Following the Chancellor’s update the bank reversed this decision. He was offered £90K at a choice of three different rates:
- Variable overdraft 4.85% over base
- Fixed for 3 years at 5.78%
- Fixed for 5 years at 6.91%
At the smaller end, one business owner only wanted to borrow £10K as an overdraft. She was initially rejected and re-applied after the Chancellor’s big announcement on 2 April. She didn’t have a relationship manager so went through the online process. She entered exactly the same information as before, when she had been rejected. This time it was approved, and the money was in the bank 8 days later.
One applicant was told that she wouldn’t qualify for CBILS because the security in her business was strong enough to lend on without the bank needing to pay the costs of the CBILS guarantee (remember, although there are no fees to you the borrower in the first year, the bank pays a fee to the British Business Bank in order to get the government guarantee). She was offered an overdraft of £160K for a year, with no personal guarantee or security charge, at an interest rate of 2.99% over base. The bank even waived the normal arrangement fee, which would have been £2.5K.
A serial entrepreneur who has a number of different businesses told me that he put in applications with Lloyds for 5 different businesses – one loss-making, one at break-even and three profitable ones. It was an interesting experiment. Not surprisingly the first two were turned down. He secured CBILS loans on the other three. He told me that he spoke with the relationship manager every few days to see how things were progressing. For the three approved loans he was asking for £140K and got approved for £125K over 6 years with interest rates ranging between 2.4-2.8%. Lloyds have a CBILS cap of 25% of the previous year’s published turnover.
From everything I’m hearing, Barclays are not keen to be progressing with CBILS loans. One insider told me that the bank’s approach was along the lines of: “We didn’t need a bailout back in the financial crisis. We don’t need government support now.” Whilst that does sound rather arrogant on the surface, as you can see below Barclays are lending and on very attractive terms.
One business owner was straight out of the gate and got on to their relationship manager at Barclays as soon as the scheme was announced. This business is based in the Northeast and was told by Barclays that they were only the second business in the region to submit a completed application. There was a fair bit of back-and-forth with documentation and forecasts. In the end they secured a non-CBILS facility of £210K at 3.06% repayable over 6 years with a 12-month repayment holiday.
Another entrepreneur told me that she didn’t have a relationship manager and ended up spending 4 hours on the phone waiting to get through to the bank. She put in her application for £80K on the 28th of March. Nearly 4 weeks later, the only thing she has heard back from Barclays was a request for more information, which she has supplied. Still waiting…
A husband and wife team approached their relationship manager 3 days after the scheme was announced, initially asking for £300K. Following the Chancellor’s update on 2 April, they reduced the request to £250K in order to stay below the personal guarantee threshold. After quite a bit of negotiation and updating plans and models, the bank wanted them to demonstrate that they were using up all of their cash reserves before they would approve the facility. There was a lot of paperwork going back and forth during this time. In the end they were approved for a CBILS facility of £150K at 3.99% for 5 years with no early redemption fees.
One business owner initially approached Metro Bank and was told they were not doing CBILS but offered an overdraft at 5% over base. This changed following the Chancellor’s announcement on 2 April, and the bank came back to him with a list of 10 questions to answer. Upon submitting the answers the bank took away the overdraft offer and proposed a CBILS term loan of £40K for 6 years, with interest at 6.25% for the years 1-3 and then 6.75% for years 4-6.
Here I’m grouping regional finance providers and foreign banks that have been approved for CBILS.
A chap in Northern Ireland, who recently bought into an existing business, banks with Danske Bank. He contacted them to ask whether he could get a repayment holiday on the loan he had taken to buy into the business. Initially the bank said no, and then came back to him offering a CBILS facility of £90K at 3.1% with a 6-year term and no repayments for the first 3 months.
An accountant based in Cornwall was unable to get through to Barclays and decided to approach SWIG Finance, a specialist provider that operates in the Southwest. SWIG were very fast to respond and kept her fully informed throughout the application process, which took two weeks. She has been offered a £15K loan at 12% above base. This is the highest rate I’ve heard about in the market.
And what about the ones who were turned down?
Not everyone is getting approved for a loan – CBILS or otherwise (particularly if you bank with Barclays). Remember, one of the conditions of getting the loan is that your business has a borrowing proposal which the lender would consider viable, were it not for the current pandemic.
Loss-making businesses and start-ups that are not yet generating revenue are not getting loans. It’s a tough one, but fundamentally the government is saying that it will back those businesses that have a good chance of survival rather than simply throwing money at every business to keep it going. Darwin strikes again.
Online lender Funding Circle has recently been approved for CBILS, but they are not yet taking applications. This is a really interesting one as previously all loans on Funding Circle required a personal guarantee. No details on their terms yet but I see this as a positive step forward for those who are turned down by their bank. The good news is that Funding Circle are fast. I’ve secured loans for clients in 5 days from initial submission to cash in the bank. Rates are higher, but if you need cash quickly Funding Circle is an attractive option.
For start-ups which have successfully raised at least £250K in equity in the last 5 years there may be hope in the form of the Future Fund, which was announced by the Chancellor on 20 April. It’s a match-funding deal, so you’ll have to raise additional capital which the government will match. There aren’t many details available yet, and from what has come out so far, it looks like it’s expensive money. Not for the faint hearted, but if you’re on the edge of breakthrough to revenue generation it could be the final push to help get you there. I will write an update when there are more details.
The taps are slowly opening, and loans are being approved for businesses that are viable. However, it’s not a case of simply rocking up to your bank and asking for money. This is still a loan from a bank or an alternative lender. As the Scouts motto says: Be Prepared!
How do you maximise your chances of getting a facility? Your lender will be asking for a lot of information. Start with your existing bank because the banks are only doing CBILS facilities with their own customers. If you have a relationship manager, reach out to them and start talking. If not, go to the bank’s online portal. All of the banks listed above now have a CBILS portal on their business banking home page, although some make CBILS more prominent than others. Find out what the bank need from you and what its process is. Get the application forms and read them very carefully. Start gathering all of your information. You will need to present at least the following:
- 2 or 3 years of full accounts
- Your most recent management accounts. It’s now late April so you should have management accounts through the end of March. If you don’t, then get them before you apply. Banks are asking for P&L, balance sheet, aged debtors and aged creditors.
- A business plan and financial projections showing what the current year would have looked like had the lockdown not kicked in
- An updated business plan and financial projections showing what the current year now looks like due to Covid19. Don’t be afraid to show your revenue falling off a cliff. Be realistic. Also show the steps you’ve taken to get other support, like the premises grant, furloughing your staff and deferring the current quarter’s VAT payment to March 2020
Together with my partners at Robot Mascot, we have developed a simple 16-question scorecard to help you assess your eligibility and readiness to apply for a CBILS facility. It’s completely free of charge and you can complete it at CBIL Scorecard.
If you need more help because you’ve never done this before, we have a couple of packages that will help you be in a position that you can take everything needed to the bank. In fact, we call our service “Take this to the bank”. To start, please go to the CBILS Scorecard and fill it in. You’ll get a short report back from us about your eligibility and your readiness. Best of all, it’s completely free of charge.
Good luck. Stay safe and stay healthy.