Our Cambridge-based principal Faye McDonough outlines the evolution of the scheme and the trends she has observed so far

It seems a lifetime ago that the chancellor first announced the unprecedented raft of support packages that the UK government would make available to citizens and businesses. 

Of these, the Coronavirus Business Interruption Loan Scheme (CBILS) was aimed at supporting the UK’s small and medium-sized companies, which comprise 99.9% of the country’s 5.9 million businesses. These SMEs, if trading successfully before March 2020, would be able to apply for the scheme to mitigate lost or deferred revenues and other disruptions to cash flow as a result of the crisis.

Since then, the prevalence of Covid-19 in the UK has been changeable, and the government has had to continually adapt its response as a result. After an initial extension to 31 November 2020, a second lockdown encouraged a further postponement of the CBILS deadline, with applications now open until 31 March 2021.

The government, the British Business Bank and the finance industry have been working together in the meantime, enhancing processes and widening the initiative’s eligibility criteria, aiming to stimulate much-needed economic activity and growth by reaching more SMEs.

BOOST&Co has a strong history of supporting innovative UK businesses and CBILS has been no exception, but we have identified some common challenges along the way. Faye McDonough, principal and head of BOOST&Co’s Cambridge office, shares the lessons that we have learned over the past few months, to help your business submit a successful application.

Early challenges for the scheme

In the first few weeks after CBILS launched, some of Britain’s biggest banks received heavy criticism for being slow to lend to UK companies. The statistics (and headlines) were damning: just 1.4% of firms had been successful in their applications and only 1% of the £330bn available had been deployed. 

A redesign of key elements of the scheme, in early April, resulted in a broader initiative with wider eligibility criteria and greater clarity around when personal guarantees could and could not be taken.

Here at BOOST&Co, we started to think about how we could improve the customer experience at such a difficult time. Collectively, we set about designing an online application process that would enable us to receive applications in volume while still devoting individual attention and analysis to each business, enabling us to make independent and informed decisions.

Gaining momentum – but can SMEs get what they need?

In May, the Treasury started to publish weekly statistics on the performance of each of its four business-support schemes, including CBILS. These show that the value of facilities approved more than doubled in two months, from £6bn to £12.65bn, but while the application numbers continued to soar, as of 18 October the value of facilities approved has only grown a further 35% in the following three months.

Disappointingly, it seems that the approval percentages have decreased over time, with the period from September to October showing a particular fluctuation as approval dropped as low as 45.9% – Ensors Chartered Accountants has created a useful summary here.  

This could suggest that it is taking longer to process applications, or perhaps a larger number of unsuccessful applications. Either way, it points to an increase in the already acknowledged SME funding gap, which was estimated to have reached £60bn before the pandemic.

Meanwhile, BOOST&Co and its sister company Growth Lending were accredited to provide CBILS and started to receive applications. During this time, we observed three key themes:

Good news for high-growth SMEs

On 16 July, the British Business Bank changed its guidance on the “undertaking in difficulty” test. This test required UK SMEs to have lost less than half of their subscribed share capital as of the end of 2019. Although it aimed to ensure that businesses receiving loans could repay their obligations, it was unduly punitive of high-growth SMEs. 

Since then, the government has made a further amendment that allows the “undertaking in difficulty” assessment to be determined at the date of application, rather than based on last year’s financial performance.

As a lender with considerable expertise in funding fast-growing SMEs, we welcomed this news. The change does not give companies automatic access to CBILS – they will still need to prove that they are credit-worthy and that they have been adversely affected by Covid-19 – but it enables us to consider loss-making businesses that expect to achieve profitability in the next 12 months.

The top five features were looking for

We welcome applications from companies in all sectors and we specialise in funding high-tech, high-growth firms. Here are the top five features of a fast-growing SME that is suitable for CBILS:

  1. Revenue we can lend against future forecast income. To do this, we require visibility of future revenues, whether that is contracted orders, a SaaS model or recurring revenues.
  2. Sectors – our expertise in high-growth businesses has enabled us to support firms in a wide variety of sectors, from business services to SaaS, and from life sciences to telecoms.
  3. Business model – with a revenue run-rate of £2m, an eligible business will have a product that is well received by customers, preferably in a B2B market.
  4. Innovative – investing in future organic growth through innovation could be the focus of the company. It could also be targeting acquisitions to accelerate its strategy and will be profitable within 12 months against reasonable growth assumptions.
  5. Ownership – the SME can be equity-backed or privately owned. We have experience in funding both types of businesses.

What does the future hold? 

It’s clear that the finance industry, the government and the British Business Bank have collaborated effectively to provide a flexible and broad scheme designed to support the SMEs that represent the overwhelming majority of the UK business population.

With approval and volume percentages decreasing, however, and with CBILS due to close at the end of March 2021, it will be interesting to see how the next couple of months pan out. Will SMEs get the support they deserve and need? Will more be done to bridge the widening SME funding gap?

What is certain, however, is that BOOST&Co will continue to help as many promising companies to thrive as possible, by providing the funding that they need to grow.


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