New support for your owner-managed business, including Business Interruption Loans of up to £5m… #CBILS

Covid-19 is likely to continue to dominate the headlines, with Europe and the US following China in national isolation as we battle to reduce the outbreak of COVID-19. Aside from the very real health consequences, there is no doubt that there will be significant disruption to individuals and businesses whose finances and supply chains are adversely affected by the virus.  

In 2019, The International Monetary Fund (IMF) estimates that the global economy grew at the slowest rate since the financial crisis with COIVD-19 expected to further reduce global growth this year.  

Last week, the Chancellor set out a series of measures in the budget to support the economy, which yesterday were extended to a c.£350bn package, to assist businesses and individuals to soften the impact. Of these, the most applicable to SMEs are:

• Business Rate Reliefs – a 12 month holiday period for businesses in leisure, hospitality and retail sectors
• Cash Grants – £25,000 per business for those with a rateable value of less than £51,000 and £10,000 for small business that pay business rates of less that £12,000
• Coronavirus Business Interruption Loan Scheme (“CBILS”) – yesterday extended from £1.2m to £5m per business, with  the Government underwriting 80% of the bank’s lending; there are no fees or, for the first 6 months, interest. 

Understanding the risk profile of taking on a CBILS loan to support your business is essential.  It is real debt in your business (the guarantee is just to the lender) and the business needs to be able to convince the funder that it can afford it.  

We can see situations with clients where this may viably provide a complete solution – particularly for businesses that currently have relatively low amounts of debt and simply need to ensure they have a funding buffer for perhaps a 3-6 month slowdown. However, there will undoubtedly be more challenging situations where there is already significant debt and/or a business is in an early growth phase, generating profits and cash flow, but potentially not sufficient to address a signficant slowdown.  In these situations, CBILS may well still be appropriate, but as one part of a package of funding.

Our team will be working hard to provide advice and support in accessing CBILS, alongside other funding, as more details are announced. 

External funding is, of course, only one of a package of measures business owners can take and early action to consider what buffer may be required is essential.  Rushed solutions are never optimal and business owners, where they have not already done so, should be looking at:

• Their cost base
• Current funding structure (in particular be aware if your business uses invoice discounting, that falling sales can provoke a rapid squeeze on cash due to availability reducing alongside earnings) 
• Potential funding requirements  

Finally, at times like these, it can be a lonely place running a business. Sometimes simply sharing the problem and gaining fresh perspective can help mitigate that pressure.  If you think we may be able to assist (and the Polestar team has considerable real experience running businesses through economic downturns), we are available to try and help –  Even if we do not have a full solution, we probably have a few ideas and an independent perspective!

In the meantime, best of health to everyone.