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Advice for SMEs seeking financial support amid coronavirus pandemic

(Image credit: Image Credit: Coffee / Pixabay)

As of 14 April, some 28,460 businesses in the UK had applied for a government-backed loan under the Coronavirus Business Interruption Loan Scheme (CBILS). However, just 21 per cent of them had been approved.

The effectiveness of the scheme – the Government’s flagship initiative for supporting UK SMEs – remains under scrutiny. And it is easy to see why, with the Covid-19 pandemic driving many organisations to the brink and, sadly, pushing some over it.

A survey carried out by market research agency Opinium in late March painted a worrying picture; 7 per cent of the country’s small and medium enterprises (SMEs) had already shut permanently as a result of coronavirus; 12 per cent stated that they are likely to do so in the next month; and 39 per cent had closed temporarily or were planning to in April.

Financial support will be essential to the survival of many of the country’s 16 million SMEs. Yet knowing what support is available and how to get it is a challenge.

Understanding the options available

As stated above, the CBILS has consumed a lot of media attention since it was unveiled in March. It is essentially a rebadged version of the existing Enterprise Finance Guarantee and was created with the aim of providing financial support to SMEs that are losing revenue and seeing their cashflow disrupted as a result of the Covid-19 pandemic.

According to the latest data from UK Finance, 6,020 loans worth £1.1 billion had been issued under the CBILS by mid-April. It is, in many instances, the best available option for SMEs seeking financial support.

Importantly, in line with the criticism it has received – namely for the application process being too complicated and the affiliated lenders being too reticent to approve loans – the scheme is being updated all the time. SMEs should monitor closely how new measures from within both the private and public sectors are affecting the CBILS as it could impact the likelihood of them successfully using the initiative to secure finance.

However, SMEs should not consider the CBILS as the be all and end all; there are probably more forms of financial support available than an SME might realise. Business loans not affiliated with the CBILS are being issued widely, and private investment – both debt and equity – might be worth considering.

Across the public sector there are also other grants and forms of financial relief available. This includes initiatives that are being set up at a regional level, such as the recent news that the Greater Manchester LEP had created a £3 million package of financial support for businesses across the region battling the impact of coronavirus.

Improving your chances of success

Deciding on the best option, or options, for financial support is only half the battle. Crucially, SMEs must get their own house in order to ensure they have the best possible chance of an application being approved.

Lenders require absolute clarity over an applicant’s finances. This means SMEs need to have all of their accounts fully up-to-date, and not just for the past year or two but going back as much as five years.

Other questions must be addressed, too. For example, does the business have existing debts? Does it own stock, property or equipment? Is there a large orderbook full of overdue invoices that could soon drop into the business’ account?

Lenders need to see all of this information so they can evaluate the risk level of issuing a loan.

It is important to note, though, that this due diligence will also help the business itself. It will ensure you have a clear picture of how much financial support is needed to survive the crisis.

When it comes to calculating the size of the loan that is being applied for, SMEs should avoid the trap of thinking too small. A tendency to shy away from debt or be overly optimistic can result in the business asking for less than it needs – particularly given all the unknowns about how and when the pandemic will ease off.

Remaining resilient and responsive

My final piece of advice to SMEs seeking financial support is that they must remain resilient and responsive.

As stated already, the number of support options available is growing all the time, while existing initiatives are also constantly changing. SMEs need to remain adaptable and alive to the evolving nature of the current situation.

Importantly, help is available, so businesses do not need to go through the process alone. Brokers and intermediaries are on hand if SMEs need advice or assistance.

More generally, a resilient mindset will be key. After all, applying for business loans can be stressful under normal circumstances, let alone right now. And in truth, many SMEs will have their applications rejected – they must take such news in their stride and plan accordingly.

This advice comes from experience. For over a decade myself and the team at have been working with UK businesses to help them to find loans and financial products that fit their needs – right now we are working with a lot of SMEs who are trying to secure finance through the CBILS.

Getting financial support can be a complicated and daunting process, especially if it is not something an SME has done before. They may not have ever considered it previously. So, preparation and due diligence are key – without them the chances of getting a loan, grant or investment are greatly diminished.

Nic Redfern, Financial Director, Know Your Money

Nic Redfern is Financial Director for Know Your Money, an independent financial comparison website.