The new coronavirus 19 (COVID-19) pandemic has led to major disruption to business activities, leaving thousands of small and medium enterprises (SMEs) facing a challenging and uncertain time. As part of its efforts to support UK SMEs, the Government has launched the Coronavirus Business Interruption Loan Scheme (CBILS) to provide financial support to businesses with a turnover of less than £45 million whose income has been disrupted as a result of COVID-19.

Following initial feedback, the scheme eligibility was extended so that more businesses could apply for up to $5 million of loans, overdrafts, invoice finance or asset finance with a government-backed guarantee. Operated by the British Business Bank, the scheme currently has 40 accredited lenders registered, and at the time of writing the government had reported over 35,000 applications for funding.

It’s also important to remember that it’s not just banks who can provide funding to support SMEs, there are a range of alternative providers available, with Challenger Banks and other specialised lenders also registered. The sharing of SME lending information is now mandated via the Commercial Credit Data Sharing Scheme and nine of the leading banks must provide credit information to other lenders to open up more options and access to finance.

Steps SMEs can take to prepare to apply for a government-backed loan

  • Know your score – having visibility of your credit score can help you understand what potential lenders see when they’re evaluating your company’s credibility.
  • Update your company information –ensure that you provide a full and accurate picture of your business to show that you’re serious about getting funding.
  • Have a game plan – loans are not guaranteed via the CBILS and SMEs will need to provide a viable proposal that would have be considered in a pre-COVID environment.  It’s important to have a clear outline of why you need a loan, how you plan to use it, and how you plan to repay it.

Alternative options

Businesses that are hesitant to take on more debt or would not find repaying a loan easy could take a look at the following options:

  • Alternative forms of payment could help some of your customers fulfil their obligations to you during this time. If you don’t currently accept credit card payments, consider opening up that avenue, for example.
  • Many other businesses are in similar situations to yours right now; that list might even include some of your partners. Given that we’re all in this together, communicating with them about how you can continue to work together can help you both come to an arrangement that can be mutually beneficial. If you come to the table with ideas and are open to theirs, the conversation should be much easier.
  • Research additional support available from the wider business community. Many organisations are offering free packages and information to support fellow businesses during these challenging times.
  • Where you can, consider how you can adjust your business model or offerings to serve your customers. Businesses all over the world are figuring out different ways to operate from delivery services for unusual offerings to commercial factories pivoting to help create medical supplies.

The most important thing to remember is that you’re not alone. The vast majority of businesses are facing similar challenges and working together to find mutually beneficial solutions is likely to be crucial on the long road to recovery that awaits businesses around the country.

Tim Vine, Head of European Finance & Risk Solutions, Dun & Bradstreet