Bank support, as promised by the Chancellor a number of times in the last two weeks, needs to mean bank support now and not at inflated rates.
Richard Churchill, a partner at Blick Rothenberg, said: “Time is of the essence for most businesses which have seen their operations fall off a cliff overnight.”
“The banks are offering them their commercial products at three-to-four times commercial rates and available in 45 days. Something needs to be done now to bridge the gap on funding and deliver funds to companies this week to avoid businesses going bust.”
He added: “While the Government hasmade the high street banks relax the need for guarantees below £250k, it is an example of the banks not acting in the spirit of what was said. Our experience is that companies which made a loss in 2019 are having all applications rejected, even with a sound, commercial reason for the loss. Just because a company made a loss last year does not mean they are not viable.”
Richard said: “While relationship managers can sign off the six-month payment holiday on loans for low risk customers, all other funding decisions and relaxation of covenants must go through normal credit committee rules which is holding up the process when time is of the essence.”
“The responsibility for this should be passed on to the Relationship Managers – they know their customers and whether the businesses are viable. Perhaps there should be immediate short-term funding where paperwork and documentation rules are relaxed for viable business. Money is needed yesterday not next month!”
David Hough, a partner at Blick Rothenberg, commented: “Banks are looking for detailed financial information before they are prepared to enter into a loan agreement. For some small businesses that have not historically had to rely on secured debt facilities, some of this information is not readily available. Business owners should use their last three years of financial results to model what their expected profits will be in the future, making adjustments for inflation, expected growth and other known factors, including the potential impact of COVID-19.”
“There is an opportunity to model short-term cash-flow requirements to assess whether a loan which does not require the personal guarantees (those under £250k) would suffice to help get access to some cash quickly in order to manage cash flows, whilst also utilising the Coronavirus Job Retention Scheme to ensure that staff retain some income and are available as soon as it is possible for the business to recommence trading.”
Would you like to know more?
If you would like to discuss any of the above guidance or have other queries about how you can make the right decisions for the future of your business and your income, please contact your usual Blick Rothenberg contact or one of the contacts to the right.
You can also visit our Coronavirus – Practical Guidance for businesses today Hub for our latest updates and insights.