Unattractive terms and a slow approval process are dampening demand for the government’s coronavirus business interruption loan scheme (CBILS), according to a business advisory expert.
The new scheme provides financial support to small- and medium-sized enterprises (SMEs) across the country that are losing revenue and seeing their cashflow disrupted, as a result of the Covid-19 outbreak.
The British Business Bank offers the scheme through accredited lenders which can provide up to £5m in the form of term loans, overdraft, invoice finance or asset finance.
“I don’t see businesses generally rushing to take up CBILS in this current time,” said Frank Wessely, partner at business advisory firm Quantuma.
“The terms and conditions are not considered generally attractive and there’s a period of processing when the application is analysed.
“I don’t expect banks to be processing this at a rapid pace. They’ll want to do their due diligence and ensure the risk fits into their parameters.”
While some businesses may be hesitant to borrow via the scheme, there are also challenges on the lending side as many finance providers are not eligible, Wessely noted.
“P2P platforms wanted to be able to offer the scheme but are excluded at the moment so there could be appetite on the other side of the fence in terms of putting loans propositions on platforms for investors but currently they don’t have authority to do that,” he said.
Mark Turner, managing director, regulatory consulting at global advisory firm Duff & Phelps, agreed that lender eligibility was currently an issue.
“Schemes are available for the banks which are seen as key to lending to businesses and supporting the economy at this time, whereas some of those schemes are not available to the P2P sector,” Turner said.
Alternative finance industry stakeholders have already called on the government to expand the scheme’s eligibility, including ‘big three’ P2P platform RateSetter and the Alternative Association of Business Finance.