Following intense criticism regarding the confines of the Coronavirus Business Interruption Loan Scheme (CBILS), HM Treasury expanded the program in a move to support a broader range of businesses – most importantly smaller firms.
Last week, Rangewell, a business finance specialist, posted an open letter to the Chancellor of the Exchequer Rishi Sunak demanding that Fintechs be added to the support process.
“Britain’s fintech lenders are world leaders and have rightfully been lauded and supported by successive governments. It would be remiss to not incorporate such expertise and resources into the Coronavirus Business Interruption Lender Scheme,” stated Rangewell.
Today, Rangewell is making three further recommendations to the Chancellor to improve CIBLS, while welcoming the changes announced by the Chancellor just hours ago.
To quote Rangewell:
- The hospitality, retail, childcare and leisure sectors have never been popular with High Street Banks or Mainstream Lenders The Treasury has already identified a full list of such businesses via the “Business Rates Holiday Scheme”
- Healthcare businesses such as Dentists, Opticians, Pharmacies and Vets have either been forced to close or are operating reduced hours under immense capacity constraints. They will perform vital roles in the health of the Nation once the lockdown is lifted. The Treasury has a full list of such businesses via their regulatory bodies.
- Subject to business viability checks, The Treasury should underwrite 100% of loans up to £250,000 to such businesses
Nic Conner, Rangewell’s Head of Research, issued the following statement:
“The firms most at need are those in sectors which have always struggled to gain finance, like Hospitality, Leisure and Retail and those vital services like Pharmacies, Dentists and Opticians that will be bearing the strain once Lockdown is lifted. The most at-risk sectors and the businesses who are operating at their capacity constraints who need the money urgently are unable to gain the funds quickly and efficiently – this could not have been the Government’s intention. The Treasury needs to underwrite 100% of the loans up to £250,000 to these at-risk sectors which they have already identified via the “Business Rates Holiday Scheme” or who are members of Healthcare Regulatory Bodies.”
Rangewell also demanded better support for viable but loss-making businesses – typically early stage, entrepreneurial firms:
CBILS, as it currently stands, is not working for loss-making companies. Banks are lending to businesses “if they would have lent to them last year” and this effectively excludes loss-making business from the Scheme.
We suggest that The Treasury loosen the rules around SEIS and EIS investments for the full 2020 / 2021 tax year to allow wider uptake of such schemes and allow equity investments to support viable but struggling loss-making businesses.
We suggest:
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- An increase in SEIS relief to 70% and EIS to 50%
- A doubling of the amounts that individuals can invest in the scheme during the 2020/2021 tax year
- A relaxing of the eligibility rules in consultation with Trade Bodies
Conner added:
“A loss-making business is not a bad business. Often they are investing heavily in growing market share, rolling out a concept or building world-leading technology. We cannot let Conoravirus wipe out a generation of our young and fast-growth businesses – they are the future of UK Business. Many businesses can’t or don’t want to take on more debt at this time – by tweaking the already extremely successful SEIS and EIS rules, the Government can quickly provide support to thousands of viable businesses who currently can’t access the CBILS Scheme.”
Range said it was necessary to open the CBIL Scheme to a much wider range of lenders, while stating High Street Banks are doing the best they can:
“The Treasury should open the CBIL Scheme to a much wider range of specialist, Fintech and private lenders with immediate effect – these lenders are already regulated, have strong credit, risk and back-office systems, work alongside multiple government agencies already and are keen to support the CBIL Scheme as quickly as possible.”
Conner said they are calling on the UK government to widen the range of lenders with immediate effect:
“Britain has the most active and diversified range of lenders in the world, many of whom emerged from the lessons of the last financial crisis. These lenders, and many others like them, already work alongside government agencies to diversify the source of funding to British SMEs and they stand ready to help and support SMEs through the CBIL Scheme. If the treasury opens the scheme up to Fintech platforms and specialist lenders then this should release much of the volume pressure on the High Street Banks and Mainstream Lenders.”