Far too late in the day, but I suppose better late than never, the FT reports that the Chancellor is preparing to offer 100 per cent guarantees on loans to Britain’s smallest businesses after sustained pressure from MPs and the Bank of England.

But let’s not get too excited, they add that:

Mr Sunak’s colleagues say he is “weighing up” whether to go against his instincts and offer full state backing to loans of up to £25,000 to “micro-SMEs” struggling to get credit to see them through the coronavirus crisis.

He said this week he was “not persuaded” that a total state guarantee was the right thing to do despite pleas from MPs, Bank of England governor Andrew Bailey, and former Tory chancellor George Osborne to change course.

Nevertheless, the rumour is that the Treasury is working on a new scheme targeted at maybe one million of the smallest companies, typically employing a handful of workers. People close to the talks said Mr Sunak wanted to ensure a new scheme could be delivered at speed and at scale.

“We have got to keep these small businesses alive,” said Mark Francois, a Tory MP. “The banks should be stepping up to the plate but they are not. If that is the case, the government may have to go to 100 per cent.” 

I wouldn’t hold your breath. He has yet to get one of these schemes right. Unlike Germany and Switzerland where the time-lapse from applying for a loan of this type to receiving the funds is hours, and the payments made are much larger, the usual massive problems to access cash will be put in the way of this scheme. The usual paranoia will apply.

So, for example, expect there to be conditions that evidence must be supplied that all other options have been applied for and used before such loans can be given. That will include commercial loans.

And expect that there will be greater concern that small sums will be fraudulently claimed than for the survival of companies, a problem overcome in Germany by linking the claims in most cases to previously declared turnover for tax purposes.

And delivery will still be via banks, which are not in any way geared up for this. Expect delays to be the order of the day. One banker told a colleague of mine this week that he could process two applications per day if all the required information was included. If anything was missing the application went to the back of the queue to wait for the additional information to be provided, hence the 3-4 weeks it is taking for loans to be approved.

Many businesses will die of cash starvation before these funds reach them.

But for some it may mean survival. If you would like help to apply for CBILS funding here are the details about the scheme, how you can prepare for your application and details of the information you should supply with your application:

1. Business bank statements for the last six months which must show:

• The account name and registered address of the business.
• The sort code and account number.
• All daily transactions.
• A history of a minimum of six months (with the most recent being within one month of your loan application date). If you can select an exact date range, be as up to date as possible.

2. Latest full unabbreviated accounts including:

• Detailed profit and loss account
• Balance sheet information

3. Latest management accounts including:

• Profit and loss account
• Balance sheet
• Aged debtors
• Aged creditors list

4. Cash flow forecast for the next twelve months showing:

• Sales and costs by month
• Government support already obtained (local authority grants, furlough grant and VAT deferral)
• How and when the loan can be repaid.

Our partner, Acorn Business Services, has prepared a Fact Find and Application form which you may find helpful to complete which you can download here.

 

Call or email me if you need help.

 

Noel Guilford