Iwoca backs CBILS for future business recovery
In a call-to-action webinar, iwoca announced it would be lending CBILS to new customers and pushed the scheme as a future opportunity for business recovery, anticipating the extension of the scheme.
Last week, iwoca held a call-to-action webinar on the future of Coronavirus Business Interruption Loan Scheme (CBILS) and announced that new customers could now apply for the loan through iwoca. It is also offering a guide to help accountants prepare client applications.
According to iwoca, the webinar is intended to increase the levels of engagement with the CBILS scheme which still continues. Currently, CBILS lasts until the end of September, but according to iwoca, there’s a good chance it will be extended beyond this.
Iwoca also highlights that more than one CBILS can be simultaneously applied for, allowing businesses to compare several offers and then make a decision on the best offer to go with.
“Many small businesses are still struggling to apply for CBILS,” iwoca commercial growth director Colin Goldstein told AccountingWEB. “It’s an amazing loan proposition compared to commercial loans pre-Covid as the interest, as the first 12 months of interest are paid by Government, and, for most lenders, there is a capital repayment holiday for the first 12 months. As we come out of lockdown, accountants will need to help clients access this loan – there isn’t going to be a better loan.”
CBILS leaves accountants in the dark
As the government dealt with the pandemic, accountants have found themselves in the unusual situation of following government announcements alongside clients – trying to answer the flurry of queries with little more information than their clients.
“It was coming out so fast at the 5pm briefings and clients would immediately be on the phone to their accountants saying ‘how do I claim it?’,” said Minerva Accountants founder Della Hudson in the webinar. “It's unusual for us as experts not to have more knowledge than our clients. Even things like the VAT changes coming up, we still don't have legislation yet.”
“As weeks went by, we found a real divergence between larger businesses and microbusinesses,” said Goldstein. “Many larger businesses have dedicated bank relationship managers and received their money quickly.” But where microbusinesses dealt with call-centres, they struggled to navigate their way through CBILS applications. “It’s only now that lenders are beginning to plug the gaps left by the banks.”
“The volume has been unprecedented,” added Xero financial partnerships director Ben Johnson. “The way these schemes work, even though they’re government-backed, [they come down to] the lenders’ liquidity, [meaning] the banks or the fintechs need to have the money to lend and follow processes like KYC and AML. “Some of the challenges they have been able to solve over time, like creating digital forms to collect that information”.
BBLS and CBILS
According to Goldstein, CBILS and it’s rapid funding counterpart, the Bounce Back Loan Scheme (BBLS) are very different products solving different issues. “BBLS have essentially been a helicopter drop of cash to over a million businesses to stop them falling over. Those businesses would be in deep trouble if not for BBLS,” said Goldstein.
“But CBILS is a very different proposition. It involves thorough underwriting by the lend for businesses to rebuild. It makes sense that businesses are now considering BBLS in the context of lockdown easing to deciding to take up CBILS. I would expect to see a surge as the scheme comes to end, and it's possible the government will extend it or change it slightly. As the economy gathers pace, I expect more will want this loan as it is the most attractive loan offer available.”
In offering bigger loans (up to £5m and £25m for CLBILS), the schemes required more planning and more complex applications,” said Hudson. Whereas with BBLS, it’s “about your turnover and you being who you say you are. It's down to us as accountants to make sure we have still done the same internal forecasting, maybe not in so much depth, but we still need to help our clients know they can repay the BBLS in exactly the same way as CBILS,” added Hudson.
“I think BBLS is very good for the smallest end where admin is a major issue, where they probably don't have regular management accounts, so it’s just based on annual figures and gut feel. The CBILS will be really good for projects to reinvest and to come out of it.”
“BBLS saw a massive flurry, but what's happening now is people are moving from putting the fire out, say with a £50,000 loan, to what they do next to get the business back up on its feet,” said Swoop Funding CEO Andrea Reynolds.
For iwoca the main issue was the fintechs becoming accredited by the BBB late in the game. “Non-lenders have to go into the private market to raise funding to lend,” said Goldstein. “In the uncertainty of the current crisis, it takes time to get these pieces of the jigsaw in place.”
Conversion of CBILS, CLBILS and BBLS
The transferable nature of the two schemes was emphasised in iwoca’s webinar made the transferable nature of the government loan schemes clear: there are no restrictions on businesses switching between the schemes. However, businesses can have only one of the schemes at a time.
Reynolds pointed out that in being tied to the BBB, there is no matching process, which is where Swoop takes its cut. “80% of Swoop customers switched to BBLS from CBILS, but now they're switching back and many are trying to refinance.”
“It’s unlikely that we will see a switch from CBILS to BBLS,” added Goldstein. It is likely to see businesses that couldn’t make any headway with CBILS and just went for BBLS as the easier application option to immediately receive funds and stop their business falling over, now looking to CBILS as a more long term solution.