Last post: Feb 14, 2022
Over 1.6 million businesses have taken government backed coronavirus support loans and for most, this would have been to plug a hole and keep bills paid. Many will now be feeling the pinch since repayments have kicked in and are unable to apply for further loan funding for expansion and recovery. If the business is clearly still viable and is able to prove that they have now turned the corner, we may be able to turn to alternative finance options.
It's tough out there for some business owners. In my role as a broker I get to see the good and the bad situations, and I really feel for some business owners right now.
During the pandemic businesses could either take the Bounce Back Loan (BBL) or a Coronavirus Business Interruption Loan (CBILS), with a year's interest covered by the British Business Bank. In many cases these businesses were either closed, or the business was hit really hard and therefore these loans just kept the bills paid.
When one normally takes on such a large loan it is for a positive reason; expansion, additional sales, new contracts, hiring people, new products, acquisitions. All positive stuff that should give a business the desired return on investment.
But the pandemic loans, in many cases, just filled a cashflow void, one that couldn't be recovered. Now those businesses are feeling the pinch of having to pay back the loans as well as reinvest in their businesses to get back on track.
The Recovery Loan Scheme was supposed to fill this role, but strict rules mean that some businesses cannot qualify as they are already highly geared with CBILS funding.
What can be done?
If the business is clearly still viable and is able to prove that they have now turned the corner there are a couple of options:
B2B businesses can look at revolving lines of credit from £10k - £5mil! Think overdraft facility just not attached to the bank.
Invoice Finance Facilities. It could be singular invoice finance, selective or whole book. Currently a competitive market place and one that won't take into account the current debt commitments. Even small sub £100k facilities are available at cost effective prices.
Asset Finance can be more forgiving on debt commitments. Often cost effective as the asset is the security until the bill is paid! Affordability needs to be proven.
B2C – Often a trickier proposition, but not any more. More and more lenders are moving into the Revenue Based financing options allowing money to be advanced to buy stock and repaid as you sell it. It is transparent on pricing and repaid as you sell, it can also be renewed simply so you can keep the stock purchase levels you need.
These lenders often offer free marketing insights to your sales platforms allowing you to understand where your sales are being generated from and how your online marketing platforms are performing.
Some of these options may carry the need for Directors guarantees, but needs must in these circumstances. There are specialist PG insurances you can get to help mitigate personal exposure.
The RLS is still a viable option for some businesses. In fact we have seen the emergence of instant decisions from some lenders minimizing what is needed to make lending decisions. We have seen some lenders make decisions based on cashflow forecasting showing a robust recovery plan from COVID.
Whatever your position is, don't just take the first 'no' as the final option. What doesn't work for one lender may work for another! We make it our business to know the lending criteria of our entire panel to help get the best possible outcome for the business. So feel free to get in touch to explore what options are available to you.
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