Recent changes to CBILS have opened up the initiative at a stroke. Here, our partner Lance Mysyrowicz explains how SMEs can benefit – and what it means for the UK on the global stage
The British Business Bank recently changed its guidance for the government’s Coronavirus Business Interruption Loan Scheme (CBILS), following an amendment to EU state aid law. From 30 July, businesses with fewer than 50 employees and turnover of less than £9m will not need to pass the “undertaking in difficulty” test.
What was the “undertaking in difficulty” test?
- The test required UK SMEs to have lost less than half of their subscribed share capital, as of the end of 2019
- It was initially included in the CBILS criteria to ensure that any businesses receiving a loan would be able to repay their CBILS obligations
- But it was unduly punitive of high-growth SMEs
Why did it punish innovative SMEs?
Most innovative SMEs invest in future growth, which results in losses early in their life. This means that the balance sheets of these businesses could portray them as “undertakings in difficulty” at the end of 2019, thus deeming them ineligible for CBILS, even if they are viable, fast-growing firms.
This scenario has affected many growth SMEs, despite the fact that they need funding just as much as other businesses do.
How will the changes help?
If your business is a high-growth SME, the benefits are obvious, in that you will now be able to access the same funding as your more established peers, but the change in guidelines is significant for the whole innovation ecosystem.
Unlocking a large amount of funding for innovative firms when they need it most will help them to survive the crisis and to emerge stronger on the other side.
Better access to funding for SMEs also affects the UK’s position on the world stage: the continual evolution of CBILS and the variety of lenders it has attracted have cemented the scheme as one of the most comprehensive and accessible SME support programmes in the world. This commitment to supporting growth SMEs will help to ensure that the UK remains at the forefront of start-up growth and innovation.
I have an innovative SME – what do I do next?
The change to the “undertaking in difficulty” test does not grant automatic access to CBILS; you will still need to prove that your business has been adversely affected by Covid-19 and to convince your lender that you are credit-worthy.
In regard to finding a lender, more than 100 have been accredited to provide funding under CBILS, but not all of these will want to lend to growth SMEs, which may not match the lender’s ideal risk profile or previous lending experience.
Growth Lending – a group comprising BOOST&Co and fellow lenders GapCap and KX Media Capital – was founded to support UK SMEs where traditional lenders could not. It welcomes applications from innovative businesses and moreover, actively wants to lend to you.
With more than 15 years’ experience of working with fast-growing firms, Growth Lending has both the capital and the desire to support the next generation of innovators in the UK. The group is accredited to provide CBILS term loans, invoice financing and revolving credit facilities, drawing on the expertise of teams in each of these areas to offer tailored, individual solutions to a wide range of innovative SMEs.