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COVID Bounce Back loans running on empty as CBILS deadline looms this month: how are borrowers faring and how do your cash reserves compare?

Bounce Back loans, the most popular HM Treasury support measure, used by SMEs are running low, according to new findings.1

Despite the small and medium-sized businesses surveyed being aware that they can get more HM Treasury support by applying for larger loans through the Coronavirus Business Interruption Loan Scheme (CBILS), many did not know that the deadline to apply was at the end of this month. 

Over 1.2m SMEs took on a Bounce Back loan to pay their suppliers (39% of SMEs did this) and bolstered their business by setting up eCommerce and online shopping channels (29% reported doing this) to attract new customers, reported lender MarketFinance, who commissioned the report.

However, the latest insights of their research have found that these SMEs only have an average of £9,106 remaining of their Bounce Back loan and the majority expect this will run out later this month. Promisingly, 6% have already repaid their Bounce Back loan. 

Time to refinance?

The CBILS initiative will conclude at midnight on 30 September 2020 with applications submitted before this deadline being valid for processing until the end of November. The majority of SMEs (77%) are aware of the larger loan scheme, CBILS, and 68% know that they can refinance their Bounce Back loan using that facility. 

The MarketFinance survey found that most SMEs (76%) would be keen on having a CBILS facility ‘on ice’ in case they need it later in the year in anticipation of larger bills and taxes due towards the end of the year. However, critically, almost two-thirds (63%) are not aware of the deadline to apply (end of September). 

SMEs expect revenues to be down 50%

Many SMEs (77%) believe they will only hit 50% of their 2019 revenues. Two-thirds are still waiting to be paid for work they did pre-lockdown amounting to £33,906, on average. An improvement from June 2020 when they were waiting for £148,917.

Looking ahead to the end of the year, they do not anticipate a festive rush, according to the latest insights. Over half (56%) believe seasonal demand will be lower than last year owing to the ongoing impact of COVID19.

Brexit and available workforce

SMES are fearful of more disruptions as 2020 draws to a close. Two-thirds (65%) reported a second mass lockdown (as COVID-19 cases increase) leading to supply chains being impacted causing delays in sales and payments as a cause of major concern. 

On Brexit, two-thirds of SMEs believe that a no-deal exit presents huge risks for their business. Chief among these are having an available workforce, not having the information to guide them on how to do business and the impact on supply chains at borders. (Q12)

Case Study: The Retail Factory

Jo-Dee Loader, Managing Director of the northwest-based retail supplier, The Retail Factory, retells her Bounce Back Loan story: “Our customers range from small corner shops to high street retailers, when the lockdown came we were heavily impacted as orders dried up and payments were delayed.”

Loader continues, “Our £50k Bounce Back loan helped secure the business, but as shops are reopening and need retail essentials, orders are picking up.”

Loaders says that they refinanced with a CBILS loan and a revolving credit facility of £250k, for its invoices, to ensure the business had the cash flow to service the demand and growth they expected in the next year.

“We’ve already hired more staff and plan to expand the business,” says Loader.

JOB ALERT!! On the company’s Linkedin site, they have posted a job search for someone to work 3-4 hours weekly on the company’s social media, email marketing and other exciting projects. For more information, they have asked for applicants to email a copy of their CV to jodee@theretailfactory.co.uk

Anil Stocker, CEO at MarketFinance, says CBILS cash is what is most needed. “The Bounce Back Loan Scheme (BBLS) was a good short term fix for SMEs. It provided the necessary support during the lockdown but looking ahead, the CBILS cash will provide the impetus to do more. Not having the cash flow to sustain businesses at the back end of the year, could be disastrous for many of these SMEs.”

Stocker suggests that that businesses start looking beyond simply survival and begin evaluating how they can adapt their business to COVID-19 conditions. “There might be new ways to change the business model and get growth going again,” he says, “securing government-backed funding now, before the deadline, is an opportunity for businesses to access the working capital they need to build for the longer term  The idea of these being “unprecedented times” has been thrown around a lot this year. Initiatives like the CBILS offer similarly unprecedented access to fee and interest-free funding – but only for a limited time.”

Research findings were based on a survey of 2,000 UK companies (which are employers with a minimum turnover of £250,000) conducted for MarketFinance in September 2020 by LM Research & Marketing Consultancy (Market Research Society approved partner and ESOMAR corporate member).

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