It seems a lifetime ago, but it is actually only a few months since some of Britain’s biggest banks received heavy criticism for being slow to lend to UK companies under the government’s Coronavirus Business Interruption Loan Scheme (CBILS), converting to loans just 21% of almost 30,000 applications in the initiative’s first three weeks and initially suggesting that they would ask for personal guarantees.

But although SARS-CoV-2 is a novel coronavirus, the struggle of SMEs to access funding from banks is nothing new. Smaller lenders have a long track record of working more swiftly and nimbly to funnel resources to SMEs, one example being BOOST&Co, which was founded in 2011 to fill this gap in the market and can provide term loans of up to £10m in just four to six weeks.

This flexibility has become even more important amid Covid-19, particularly for innovative businesses in need of capital, many of which have been excluded from CBILS by the “undertaking in difficulty” test. This was designed to ensure that only viable companies are supported through the crisis, but has allowed businesses with high growth rates to fall through the cracks.

Tech companies punished for early losses

“Small tech businesses have fallen outside the rules because they have to invest an awful lot in research and development when they start out; they incur a lot of losses earlier in their life cycle and aren’t immediately profitable,” says Ryan Sorby, Manchester-based principal at BOOST&Co, which specialises in funding high-tech, fast-growing firms.

However, recent changes to the European Commission’s state-aid law have opened up CBILS to the UK’s tech sector at a stroke – and have also enabled smaller lenders to step in with fast and flexible funding, as management teams race to mitigate the effects of Covid-19 on their businesses.

The “undertaking in difficulty” test will be replaced by a light-touch test for companies with fewer than 50 employees and turnover of less than £50m, “which is almost like this entire sector being released from the restrictions just by the changes to these metrics”, Sorby says.

Fast and flexible funding that focuses on growth

In light of this change, why are smaller lenders best placed to help? The accredited CBILS provider Growth Lending, a group comprising the lenders GapCapKX Media Capital and BOOST&Co, is one provider that does not dwell on past glories, instead focusing on companies’ potential for success.

“Growth Lending is focused, first and foremost, on growth,” says Lauren Couch, managing director of the group. “Unlike many banks, we can take into account current or future revenues, we can lend to loss-making companies and we can offer CBILS loans to be used for liquidity, including funding acquisitions or MBOs.”

Smaller lenders are able to move quickly, and they can offer a more personal service, too: Couch notes that Growth Lending assesses each application individually, tailors loans to qualifying companies and can look at businesses regardless of where they bank.

So, for management teams asking where they can access funding amid an unprecedented crisis, the answer may be to explore less well-known providers and look beyond the banks. SMEs already know that small is beautiful, after all.

• This article was originally published by Business Insider in July 2020
• Call Ryan on +44 (0)7784 231378, email him or connect with him on LinkedIn
• Call Lauren on +44 (0)7784 237245, email her or connect with her on LinkedIn


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