Useful insights for corporate finance advisers and SMEs on how to navigate the last minute rush for CBILS
6 months on from national lockdown: How the Alternative Finance industry reacted
As accelerating Covid-19 infection rates led to Boris Johnson announcing a national lockdown on 23 March, who could have predicted what the next 6 months would have in store for the economic health of UK businesses and the personal health of its citizens.
The first priority for ThinCats and many lenders (other than looking after the wellbeing of staff and their families) was to support their existing borrowers through the crisis.
We found that by being as flexible as possible on repayment terms and on covenants gave our borrowers valuable time to assess the real impact of Covid on their business models and future strategy. In fact, many of our clients have come through the pandemic so far, in a stronger financial position than they had initially expected.
We also wanted to ensure borrowers could access the more favourable terms available through the Coronavirus Business Interruption Loan Scheme (CBILS) so were proud to be one of the first alternative lenders to be accredited for the scheme by the British Business Bank back in April.
Ideally, we would like to have seen more alternative lenders accredited much earlier in the scheme to provide more competition to the original panel of CBILS lenders that automatically qualified as participants in the Enterprise Finance Guarantee scheme. The key blocker to creating even more competition in the sector remains though; allowing non-bank lenders to access Bank of England funding on the same terms as the banks.
In July we were excited to extend CBILS to new borrowers which introduced ThinCats to many new advisers and borrowers.
From initially supporting clients with funding for working capital, we saw more proposals from borrowers to fund strategic growth plans as lockdown restrictions lifted and businesses had a clearer picture of their new trading environment and the new opportunities that had emerged.
Outside of CBILS there is significant pent up demand for borrowing and we are turning our efforts to funding a range of performing businesses through Q4 and Q1 2021.
So far, the alternative lending market has responded well to the challenges raised by the pandemic by delivering significant volumes of funding to UK businesses. Given this is the first major economic shock since the financial crisis, it is encouraging to see that default rates currently remain low.
Significant economic risks from further regional or national lockdowns remain, however, particularly for those sectors most directly impacted by social distancing restrictions and we expect Government to announce further support measures as the severity of a second wave of infections strengthens.