On 6th April the Recovery Loan Scheme was launched. Replacing the Bounce Back Loan and CBILS the new scheme is designed to support businesses in need of growth funding. We look at how the scheme works and how it could benefit your business.
As businesses focus on getting back on track no one can ignore the level of debt firms accessed in 2020. We review a report from UK Finance which lays bare the extent of debt businesses have taken on and how some owners are beginning to worry about their ability to start repaying.
To close this Bulletin, news from Metro Bank on a new addition to their mobile banking app. The function will allow users who don’t wish to use an online accounting software package to create their own branded invoices.
Here also is the transcript of this edition of the Business Finance Bulletin
In this Bulletin, the Recovery Loan Scheme launches. Could it help you get back on the path to growth? Businesses, borrowed a record amount in 2020, but now it’s payback time. And Metro bank helps its clients manage cashflow better by launching a new invoicing tool. All of this in the latest Business Finance Bulletin
Recovery Loan Scheme Launches
Well, finally, the Recovery Loan Scheme has been launched. On the 6th of April lenders opened the doors to applications under this new Recovery Loan Scheme. This scheme of course, is a replacement for CBILs and Bounce Back Loans, which closed for applications on the 31st of March. So will this new scheme allow you to get back on the path to growth? Well, let’s take a look at what the scheme entails.
First of all, if you’re looking to borrow via an overdraft facility or a loan, the starting application amount is £25,001 up to a maximum amount of £10 million. If you’re looking for finance via asset finance or invoice finance, the starting amount is as low as £1,000. Again, up to a maximum of £10 million. How long can you borrow for? Well, for an overdraft or an invoice finance facility, you can have that over three years. For loans and asset finance, the maximum term is six years. So a good lengthy term in which to manage your monthly repayments.
So what can you use the money for?
Interestingly, the scheme says you could be eligible to apply if you’ve been impacted by COVID. Now it doesn’t say negatively impacted by COVID, so the implication is, of course, if you’re one of those businesses that has boomed in the pandemic, you’ve seen a surge in sales, you may need additional working capital, buy new machinery, or plant and equipment. That means you will be eligible under the scheme. So it’s a much more positive forward looking scheme other than like CBILs and Bounce Back Loans, which is very much about survival money. The new scheme is about growth money.
In terms of the interest rates, that’s still now being capped at 14.99%, including all of the fees that the lenders will be charging. So at least there is an upper cap, but lenders of course, will be free to set their own interest rates.
Now, in terms of repayments, unlike CBILS and Bounce Back Loans, you have to start paying from day one. In fact, your first payment wILL come one month after you’ve drawn down the loan. So you have no moratorium here and you were responsible for all of the costs on a day one. So a good scheme, and it only lasts until the 31st of December. You really need to be very focused and get your applications in.
At the moment as I record this, there are only 18 lenders who have been accredited by the British Business Bank. I know there are other lenders in the pipeline looking to apply, and this compares to over a hundred lenders across the CBILs and Bounce Back Loan scheme. There’s probably not going to be as much appetite amongst lenders to support this scheme, but still it would be a good variety of lenders for you to choose from.
If you want to know more about this scheme and how it can work for you, always happy to have a chat, just drop us an email info a business loan services dot co dot uk
Business Borrowing in 2020
On many occasions over the last 12 months, I’ve highlighted the fact that businesses have had an insatiable appetite to borrow money. It’s not surprising given what’s going on with businesses, just needing funds to keep going or to plug the cash flow gaps. Well, this demand for finance has been highlighted in a new report from UK Finance.
UK Finance is a trade body for all of the UK lenders and it’s reported in its latest Business Finance Review that in 2020 lenders said that they lent new money, new money out the door, totaling £63.6 billion; just under £64 billion of new finance arrangements. Now that’s a staggering figure on its own. However, compare that to the new loans they issued in 2019, a normal year. Well, the increase in 2020 was 162% on the previous year. Yes, a 162% jump in new financial arrangements. So it just shows the level of that the businesses have now taken on.
In fact, the report highlights that a quarter of business owners are now saying they are beginning to panic a little bit, because these repayments are obviously going to be starting now during April, May and June for the majority of businesses. So they realise now the level of that, that they’ve taken on, which has to be paid back.
Now, this new debt that’s been taken on, not only is it new money, but it’s also diverted it from other financial products as well. The Finance and Leasing Association, for example, have just released figures to the end of February, 2021, which shows a demand for asset finance, being leasing and HP volumes fell in the 12 months to February, 2021 by 24% compared to the previous year in February, 2020. So it just shows a combination of two things. The demand for asset finance generally has fallen because businesses just weren’t investing. But also there’s an element of the fact that they had CBILs and Bounce Back money. And so it didn’t need to access asset finance facilities.
So we can see there’s a lot of problems that are going to be facing businesses during this year, as I’ve mentioned in the previous segment, we’ve got the Recovery Loan Scheme, which may help plug further gaps, but of course, we’ve now got this huge lump of debt, which needs to be paid back.
Metro Bank Invoicing Tool
Over the last few years we’ve seen a rapid increase in the number of businesses that are using a large variety of online accounting software packages designed to make accounting that much easier. Well, not really. They’re very small businesses out there who perhaps don’t want to get tied into a monthly subscription, or really just don’t do large volumes to justify the cost of packages. Well, Metro bank has recognised that, and this and has now announced that it’s launching an invoicing tool to sit alongside their mobile banking app.
If you’ve got an account with Metro bank, and you don’t do large volumes, you can now create an invoice within your mobile banking app. You can create an invoice, assign it to a particular customer, assign it in terms of one of your particular products or services, and also even branded up with your logo. So you’re going to issue the invoice direct via the app.
The customer receives it. They pay you back into your Metro bank account, and then you can reconcile you invoice versus what you’ve had paid back in. It will allow you then to keep track of your cash flow and more importantly, chase those people who haven’t paid.
So it’s a great idea for Metro bank for those smaller businesses who don’t want the all singing, all dancing, accounting software packages. If you want to know more about that, you can find out more from the Metro bank website, which is www.metrobankonline.co.uk/business. A great, innovative idea from Metro bank.
Well, let’s it for another Bulletin.
I hope you enjoyed watching and listening to it. And if you did, please, don’t forget to give it a like, a share and subscribe to this channel. So thanks very much. Look forward to being with you again, next time.
Hi Rob, it was so interesting and entertaining listening to you at the Kevin Green Wealth Coach Workshop in Reading this weekend! I didnt realise you can find Finance proposals such fun!. Brilliant tips! Thanks.
Rob kindly agreed to attend the recent Pontypridd RFC sponsors networking evening and delivered what can only be described as an excellent talk on 5 Tactics to Boost Your Business and Your Profits. He kept the audience engaged throughout and the feedback from everyone was excellent. Rob is very knowledgeable on business and finance and on top of that is a genuine nice guy. We hope to have him back at a future event and I have no hesitation in recommending Rob’s services.
I wanted to thank you for such an insightful, energetic, and entertaining talk at the Kevin Green Wealth event on securing funding and creating a successful plan. It was brilliantly executed and a pleasure to listen to and the ideas I’ve learned are definitely going to help me in going forward.
Further to your recent presentation at LEAD Wales just wanted to say it was very refreshing to see somebody talk passionately and positively about finance, very insightful!
Rob delivered a series of 3 workshops aimed at understanding how finance houses look at finance propositions with the aim for us as a team to deliver more of a bespoke offering to our customer base. The training was delivered to a mixture of staff who work with new businesses start-ups and existing established businesses across Mid & South West Wales. Rob delivered the training with an abundance of passion and has really helped my team look at financial propositions in a different light, many thanks again Rob and I look forward to work with you in the near future.