UK Banks 'Epic Fail' on Coronavirus Business Interruption Loan Scheme (CBILS)
The Chancellor announced £330bn availability under the new CBILS program yet two weeks on and the collective UK Banks have only lent £145m to UK SMEs, why?
April 3rd 2020 - Friday night, 5pm and the UK business community expect to see our Chancellor, Rishi Sunak reassure us that everything will be OK with the economy, or so we thought but NO, he is nowhere to be seen.
We hear more of the bad news from the Health Secretary, Matt Hancock (who in fact is very cool under pressure and a first-hand knowledge have suffered from Coronavirus himself - great job thus far Matt).
But the Big Question is: Where the f**k is the Chancellor hiding and why has he decided to go from mister big show to mister no show?
Two weeks ago, we sat and listened to our PM tell us of the lockdown, the closure of the pubs, restaurants, cinema’s etc and whilst this in itself is fundamentally a ‘once in a lifetime’ event, the UK public seemed to, on the face of it, accept the decision, get on with life and start the process of self-isolation- life has to go on.
Then came the saviour moment - Rishi stepped up to the plate and delivered what seemed to be an incredible strategy to support the lifeblood of the country - small businesses.
He said that the UK Government’s Economic Response would be “one of the most comprehensive in the world”, so where is all of this promised support and where is he, where is the so-called advertising campaign designed to reassure the business community that the support will be forthcoming.
Rishi Sunak’s speech was supposed to reassure us all but was it all just BS from a guy thrust into being Chancellor because Boris didn’t like the last one:
No Limit of Funding
You are ‘Not Alone’
Collective National Effort
Loans Available from Monday March 23rd 2020
But the simple fact remains, there hasn’t been any support provided by Govt yet and it looks like it may be weeks, if not months away - far too long to protect many businesses in the UK (estimates that 20% of the entire UK SME Sector may close or fail by June 2020).
He announced the COVID-19 Job Retention Scheme to allow workers to be furloughed at 80% of salary up to £2,500 per month for 90 days but how will the everyday companies pay these wages at the end of April when the banks won’t lend and the HMRC scheme looks like it will take months not weeks to set up.
Business owners need their people but the stress of uncertainty may force them to just simply lay them off because they cannot afford the furlough cash costs, what is worse, many are not prepared to get ‘hocked-up’ to the bank so they will simply shut the doors.
Rishi Sunak praised Business Groups like the CBI for help during the crisis, well they do not seem to share that sentiment now that it’s been two weeks since his speech and he’s gone missing - talk about a hero to zero.
He called on the great institution of British Banks to step in and help small companies, an unprecedented loan scheme available under the Coronavirus Business Interruption Scheme and backed by an 80% govt guarantee and zero interest for 12 months.
Suddenly, there was hope, there was a way through this crisis for the 000’s of companies that will be massively impacted by this global pandemic, he is stepping up and giving the banks £330bn capacity to help out business.
Coronavirus - Economic Crisis 2-Weeks On
So - Here’s the Big Question:
Where is Rishi Sunak?
Have we helped the SMEs & protected jobs?
How have the Banks stepped up?
Nobody knows where he is
The economy is in deep trouble like never before
And the Banks - wow, they have performed badly, worse than could ever have been imagined.
It was announced that £330bn would be made available on Monday, March 23rd - well not really as all the banks were in training trying to understand what the loan scheme meant.
The CBILS is actually just a revision of what was already available to companies under the older EFG (Enterprise Finance Guarantee) scheme so it’s surprising that Banks need to be trained, it’s been available for many years at all levels of Business Banking, again the red tape is exactly how the banks hide away from granting any loans.
Yes, CBILS has a higher loan limit of £5m whereas EFG was only up to £1.2m (CBILS is interest-free for 12-months which is good) so CBILS seems more favourable at a time of national crisis but it really isn’t and here’s why:
The criteria of the loans are based only on affordability, effectively the ability to pay the money back so it then becomes based on your profit (EBITDA from 2019) so if you made a small loss or even a very small profit in 2019, your chances of borrowing is slim to none.
Moreover, the Govt reduced the term of the loans from 10 years to 6 years making the affordability criteria even more difficult to justify. Then you have to remove the existing cost that a business already has for its equipment or machinery so the cost of HP agreements is then removed from your profit to again reduce your capacity to borrow.
Get my drift on how easy Rishi Sunak and the Bank CEO’s have made this product, financial geniuses.
£330bn available on March 23rd 2020 - can you guess the amount actually lent to UK business by April 3rd 2020 (10 working days although there really isn’t a non-working day at the moment), so two full weeks later.
A WHOPPING £145m
Do the maths - that’s £14.5m for 10 days and if my maths is correct - if this rate continues it will take UK Banks 87 years to lend the money and that’s if you can afford it.
SMEs who made a loss in 2019 cannot access the scheme, it does not account for 2020 performance to date nor expected performance and growth, it does not consider the furlough wages costs nor does it really take into account the terrible predicament of coming out the other side of this crisis and getting business back to some level of normality - not what you’d expect from UK PLC.
Trump’s War on COVID-19 & the Economic Impact
Now we often hear about our friends from over the pond, well this time Donald Trump is putting Boris Johnson to shame.
He may be vilified by the Democrats but you can see why the Republicans love him. He’s a businessman, he’s a deal maker, he has an incredible work ethic, he doesn’t have Coronavirus and he’s stepping up to the plate -on everything.
Medical Equipment, Hospitals, PPE and Paycheck Funding - $2tn dollars in bailout money, whatever it takes.
On the phone constantly with Industry & Banking CEO’s, mobilising and motivating them to get things done.
So he gives the US Banks the guidance on Thursday April 2nd and Bank of America has its ‘Paycheck Loan Scheme’ portal up and running by the next day - 85,000 loan applications for $22bn on Day One and the rest of the US Banks will be online to take applications by Monday latest.
"Great job being done by Bank of America and many community banks throughout the country. Small businesses appreciate your work!" Trump wrote on Twitter.
It cannot be that hard for Rishi Sunak to call the UK Banks CEO’s and tell them to speed up, relax the rules, make it about saving companies, saving jobs - good businesses in 2019 will be good companies in 2021 but the Government and the Banks have a job to get them through 2020, the here and now.
Calling on Barclay, RBS, Lloyds, Natwest etc - you got your bailout 10 years ago, now is the time to stop hiding behind the red tape, relax the rules, forget bonuses and dividends for 12-months and mobilise your teams to lend, lend, lend until we get through to the other side of this pandemic.
The Business Community is watching your actions and they won’t forget the way they get treated so make sure your bankers answer their mobiles, stop ignoring emails from their clients, start working night and day to get the credit applications written and stop hiding behind the backlogs in getting loans approved.
Support UK Business or it will crumble.