Are you soon facing your first Bounce Back Loan repayment? Many businesses have just paid their first repayment or soon will and are concerned with cashflow still tight. Opening our latest Bulletin, we look at repayment options under the Pay as You Grow Scheme designed to ease your cashflow burden.

A government Bill has been proposed to close a loophole in the insolvency process where Directors can dissolve their company with the aim of walking away from their Bounce Back and CBILS loan liabilities. The Bill, if passed, could see Directors facing sanctions if found guilty of fraudulently dissolving businesses.

To close, a new report highlights that after losing a share of the business lending market, High St banks are again becoming dominant lenders over the alternative lenders and Challenger banks. Is that a good thing?

If you would prefer to listen to the podcast version you can click below or download to listen to later via our Soundcloud, Google, Spotify, Stitcher or itunes channel.

Here also is the transcript of this latest Bulletin…

Bounce Back Loan repayment options; focus on directors who dissolve companies to avoid repaying government loan schemes; and return of the dominance of big banks in lending.

All of this in the latest Business Finance Bulletin.

Bounce Back Loan Repayments: Pay As You Grow

Are you one of the 1.5 million business owners that took out a Bounce Back Loan and you took it fairly early on? Well, by now, you will have had a letter from the bank advising that your payments have already started or will shortly be due. Many business owners are beginning to realise about the extent of the liability they took on. We’re certainly having more conversations with business owners who were not realising they’ve got to start paying this debt back.

A recent survey from Lloyds Bank highlighted that 29% of business owners didn’t realise that the government has now launched a new scheme called Pay As You Grow. Under this scheme, you’ve got a couple of options in order to lessen the pain of this first repayment. Obviously you’ve had this money now in your bank account for 12 months, and you’ve got a shock when this first repayment is coming due.

So what are you options? The government’s given you three things you can do. First of all, you can extend the term of the loan from 6 years up to 10 years. You can either take an interest only period for six months, or you can take a complete repayment extension for six months. So this is going to give you some breathing space.

Many people say this is not going to affect your credit record. Well, it’s kind of true in that it won’t go formerly on any of the credit reference agencies, so your record is clear from that point of view. However, do bear in mind, if you are taking one of these extension options, from the bank’s point of view in its internal records, you are flagging yourself up as a business that technically is still in distress. You’ve held your hand up and say, I can’t meet the payment and I need interest only; I need a complete holiday for six months or extend my loan for 10 years.

You are really sending a signal to that lender that all is not well.

Similarly, when you go to apply for finance with an external lender or third party lender, they will also be asking the question, when is your Bounce Back Loan repayment due? And again, if they’ve seen that you’ve taken advantage of this Pay As You Grow scheme, they will also take a step back and say, “Hey, you’re saying that you’re still in trouble.”

So whilst these schemes are great, just bear in mind, the potential impact or the unintended consequence asking for this forbearance can have. Of course, as always, if you are in trouble, make sure that you seek professional advice from your accountant or perhaps an insolvency practitioner, if your business is in that much of a kind of financial distress.

Whilst the scheme is great, just bear in mind, the unintended consequences that could happen if you request one of these forbearances.

Changes to Company Dissolution Rules

As I mentioned in the first section, the Bounce Back and CBILS loan repayments are now starting to be debited to business bank accounts, and the realization, as I said previously, it’s beginning to dawn on business owners, the liability that they’ve taken on and in many cases cashflow may still be a bit tight.

Regretfully, there may be some business directors out there who may think that I know what I’ll do, I’ll just dissolve my company and because I have no personal guarantees on the Bounce Back loan, or my CBILs (if you’ve taken it up to £250,000) why don’t I dissolve my company? That’s it job done. I walk away.

Well, the government is obviously wise to this because they’ve tabled a bill in parliament called the Ratings, (Coronavirus) and Director Disqualification (Dissolved Companies) Bill. Why don’t they come up with more snappy names?

This bill is designed to give the Insolvency Service the ability to investigate Company Directors, where they believe the company has been deliberately dissolved in order to avoid paying back any of the government loan support schemes. If you are found guilty of doing this, you could face a ban from being a Company Directory for up to 15 years. It’s designed to stop directors closing one company down and immediately starting a similar company under a different name the very next day.

If you are thinking of trying to walk away from this liability by dissolving a company, watch out, this really could come back and bite you.

As I mentioned, the previous segment, if you do want to take some advice, make sure in this situation, you go and seek advice from an insolvency practitioner. These are the ones who can guide you through this process. Don’t try to be clever because it really will trip with you.

Dominance of Bank Lending

In 2010, When I established business loan services, we were very much in the middle of the credit crunch. From 2008, 2009 the main high street banks effectively withdrew from supporting small businesses with finance. That of course left the door wide open for the rise of the new alternative lenders. And these guys have really been championing the cause for small business finance, taking a large share of the market.

When 2020 arrived, the Coronavirus really is up ended this kind of evening out of competition issues where the banks had the dominance in the marketplace.

A new reports has come out by Social Market Foundation and Metro bank. They’ve worked out that pre-pandemic, the alternative finance providers had 48% of gross new lending to businesses. Post Corona virus, that’s now fallen to 31%. So we can see that the big banks are starting to come back into play.

However, it’s more by default than design because with the Bounce Backs and CBILs loans, very many of them have come from the high street banks. But the danger here of course, is as demand for finance remains quite muted, some businesses are sitting on a lot of cash and still have money left over from the Bounce Back Loans and CBILs. It means that some of these smaller alternative finance providers may struggle to make inroads into the marketplace if demand for finance remains muted.

The danger of course, is that some of these alternative finance providers may close their doors and that will be a shame because the high street banks naturally just do not have the appetite to support small businesses.

Let’s see what happens over the next 12 months or so and let’s hope that the marketplace still remains competitive when it comes to access to funds.

Wrap Up

That’s it if for another Bulletin. I hope you enjoyed watching and if you did, don’t forget to give it a like, a share and of course, subscribe to this channel.

That’s it for another week. I look forward to being with you next time. In the meantime, have a great and successful week.

Opening this Business Finance Bulletin, fears of another Credit Crunch are mounting with the Bank of England calling on banks to play their part in meeting funding needs as business start gearing back up.

The latest figures from the Finance and Leasing Association reveal how demand for Asset Finance facilities has dramatically fallen over the last quarter. We look at the two factors which are driving this decline.

To close, a review of which areas of the UK have taken the most CBILS and Bounce Back Loans, and the latest figures on how many loans have been accessed by businesses in need of finance.

If you would prefer to listen to the podcast version you can click below or download to listen to later via our Soundcloud, Google, Spotify, Stitcher or itunes channel.

You can also read the Transcript of this Bulletin below.

Business Finance Bulletin for Week of 10^th August 2020

The Bank of England calls on banks to help avoid another credit crunch; economic woes are affecting demand for Asset Finance ; and the areas and sectors in the UK that are using CBILS and Bounce Bank loans; all of this in the latest Business Finance Bulletin.

Calls to Avoid Another Credit Crunch

In a previous bulletin I mentioned that I had concerns that we may be seeing another credit crunch by the tail end of this year, and certainly in 2021. Well, it seems that the Bank of England also have similar concerns.

One of the many committees the Bank of England has is the Financial Policy Committee. That committee has responsibility to monitor and oversee risks that the UK economy could face. The latest committee report has suggested they are concerned that banks may not be there to meet the cash requirements of UK businesses.

The committee estimates that there’s probably going to be about £200 billion demand for finance as businesses come out of lockdown and start growing again. One concern is that the banks may not be there to meet that demand. Now, the committee recognises that the banks have done extremely well in supporting businesses before and during lockdown, with an estimated £70 billion of net borrowing distributed; net borrowing, means new money lent out, less money’s paid back.

Of course there are alternative sources of finance. And one thing that popped up last week, IWOCA, an alternative cashflow lender has tapped into a £100 million of funding. It has gone to all of the UK banks and said, “If you’re not happy to support your clients, we further them over to us.” We can see that the alternative finance sector is already stepping into the gap that perhaps may be left by the banks. Interesting developments, so watch this space in order to make sure that you are ahead of the game when it comes to raising finance,

That’s a huge slug of money, primarily sourced via CBILs and Bounce Back Loans. However, with this £200 billion gap, the Bank of England wants to make sure that the banks are there to meet that demand. They are concerned that with insolvencies going to be on the increase, the banks are going to be faced with even bigger losses and therefore will contract and step back from the market in order to conserve their capital. Obviously the Bank of England doesn’t want that, so it’s making an early call to banks to say, “Hey banks, we’re watching you. We want you to be out there supporting UK businesses in 2021”.

Fall in Demand for Asset Finance

Let’s move on now to demand for finance and interesting figures out from the Finance and Leasing Association. Its members are responsible for issuing facilities such as HP and leasing to finance the purchase of capital and machinery.

The figures are for June 2020 and in the month of June, 2020, compared to the month of June, 2019, the total volumes of business written by that sector was down by 41%. That just shows how big the change in the market has been. If we look at the first six months of 2020 versus the first six months of 2019 there, the drop in the volume of business was down by 32%. If we look at the last quarter, the second quarter of 2020 versus the second quarter of 2019, the drop has been a massive 49% in terms of volumes of business written, yes, nearly 50% drop.

What’s driving this?

There are two things. First of all, it’s lack of investment appetite amongst businesses. Many of them are very cautious at the moment, sitting back and watching the market and really don’t want to commit to any capital expenditure at the moment. However, on the other side, we’ve also got many businesses which do want to invest, and instead of obtaining finance have said that they are going to use funds, released via Bounce Bank loans, and CBILs loans. Yes, they’re going to use cash instead of using finance facilities. So, two things at play here.

CBILS and Bounce Back Loan Updates

Closing this week’s Bulletin, our usual look at what’s going on in the CBILs and Bounce Back Loan market. Now, before I take my usual look at the number of facilities drawn, I want to review a report issued by the British Business Bank, which focuses on areas and also sectors that have accessed these government loan support schemes.

First of all, CBILs loans outside of London and the Southeast, where many of businesses are based, it’s businesses based in the East of England that have taken out the most CBILs loans. In terms of Bounce Back Loans, again, excluding London and the Southeast, it’s businesses based in the Northwest, who’ve taken out the largest number of Bounce Back loans. If we look across the UK in terms of where businesses are registered and who’s accessed loans, it’s quite evenly spread and the numbers kind of match each other. It’s good to see a good even spread of businesses accessing support.

In terms of what’s going on in the scheme, figures to the 2nd of August have been released and in total, the amount accessed via the scheme now stands at £50.7 billion. How does this break down? In terms of Bounce Back loans, the number of loans distributed stand at 1,135,575 with £34.3 billion issued, at an approval rate of 82%.

In terms of CBILs loans, the number of loans distributed stands at 58,595 with £13.1 billion issued with an approval rate of 49%, a slight dip on the kind of average of 50%. So again, many businesses still unable to access CBILs. As I’ve mentioned over time, with the CBILs loans coming out with very low acceptance rates, don’t forget, there are many alternative providers out there who can step into that funding gap and help you out. We can see lots of businesses still accessing these schemes, but don’t forget the CBILs ends at the end of September. So, if you’re thinking of applying, you need to get in quick,

Wrap Up

That’s it for another Bulletin and I hope you enjoyed watching. If you did, please, don’t forget to subscribe to this channel and also give it a like and, a share. That’s it, and I look forward to being with you again, next time. And in the meantime, have a great successful, profitable and safe week.

The latest quarterly Credit Conditions Survey from the Bank of England for Quarter 3 2018 reveals that both bank and businesses appear to be adopting a cautious stance when to comes to lending and borrowing.

This quarterly survey of bank and building society lenders is to assist the Bank of England in understanding trends and developments in the banking sector. Lenders are asked about their experiences over the past three months and the coming three months in terms of lending to businesses of all sizes.
The Bank has reported that the overall amount of lender credit made available to businesses of all sizes was unchanged in Quarter 3. Within the total available finance, the availability of credit provided to small businesses was reported to have increased and was unchanged for medium and large businesses. So all appears well from the lender’s perspectives in the last Quarter.

However, the Bank’s monthly reporting of amount of credit taken by small businesses shows that the total amount of lending in the 12 months to August has essentially flat-lined this year. It seems that small businesses have limited appetite to borrow and not heeding the bank’s message that they have funds to lend.

Looking ahead to the next Quarter, this lack of appetite to borrow is reflected in lender’s view that the overall amount of credit they will make available in Quarter 4 is expected to decrease slightly.

Both borrowers and lenders seem to be battening down the hatches.

As well as concerns about the economy and the political situation, small businesses may also be wary of taking on additional debt due to concerns on ability to pay. The Credit Conditions Survey highlights that lenders have reported an increase in default rates, which are missed payments, on loans to businesses of all sizes in Quarter 3. Lenders though are expecting default rates to remain unchanged for businesses of all sizes in Quarter 4.

It would appear that an element of uncertainty creeping in for both lenders and businesses in terms of what lies ahead in the last Quarter of 2018.

Buying a franchise is a way of minimising the risk when starting a business. However, funding the purchase can be a challenge. To open our latest Bulletin, we look at news that Hitachi Capital has acquired Franchise Finance Ltd which provides hands-on support to people looking to buy into a franchise.

Continuing a trend emerging over the last few Bulletins, we review recent figures from UK Finance which reveal that borrowing levels among small businesses continue to fall. Are we seeing the early signs of forthcoming slowdown?

Whilst we are seeing business borrowing levels decline, the opposite is happening to business savings. Businesses are hoarding more cash than this time last year. Although cash held in banks is on the increase, are businesses getting the best interest rates?

If you would prefer to listen to the podcast version you can click below or download to listen to later via our Soundcloud, Stitcher or itunes channel.

You would think that when it comes to selling a business, it would be the more mature ones putting up the ‘For Sale’ sign. Latest findings from Barclays Bank in their Entrepreneur’s Index report reveal that more younger businesses than ever before are being sold.

As we approach the year-end many business owners will find themselves with time on their hands as the seasonal slowdown kicks in. In a new survey, Lloyds Bank asked business owners what they will do during this quiet period. Do they spend time planning or kick back and do nothing?

To close the Bulletin, we look at the latest small business bank lending figures from UK Finance. The trend of a slowdown in an appetite to borrow and a build up in cash deposits still continues.

If you would prefer to listen to the podcast version you can click below or download to listen to later via our Soundcloud, Stitcher or itunes channel.

With alternative finance becoming an increasing source of finance we kick off this Bulletin with news of the launch of The Association of Alternative Business Finance. Formed by seven players on the alternative business finance scene, the Association is focused on delivering higher standards in the industry.

Time is moving closer to government action on late payment. To lessen the prevalence of late payment I take a look at the forthcoming Duty to Report regulations which places an obligation on large businesses to disclose details of their payment practices.

Are there signs that business appetite to borrow money from banks is beginning to wane? We examine the latest bank lending figures released by the Bank of England.

If you would prefer to listen to the podcast version you can click below or download to listen to later via our Soundcloud, Stitcher or itunes channel.

In this Bulletin, we kick off with our monthly round-up of how lenders are supporting businesses in terms of accessing finance. We look at the latest figures from the Asset Based Finance Association which reveal record business being written by the asset finance sector and levels of support given by the traditional High Street banks.

We review research from Aldermore Bank which shows that business confidence continues to define expectations with SMEs positively looking forward to 2017. How are they planning to expand?

The government is finally beginning to share the rules and regulations they plan to implement in 2017 to curb the late payment epidemic. We look at the steps they will be taking with effect from 1st April 2017 and no doubt large businesses will be concerned about another set of bureaucratic rules to follow!

If you would prefer to listen to the podcast version you can click below or download to listen to later via our Soundcloud, Stitcher or itunes channel.

We open this Business Finance Bulletin by taking a look at the latest Bank of England statistics on bank lending to small businesses. The figures to the end of July show strong support to SMEs but will this continue post-Brexit?

Bad debts and writing off irrecoverable amounts is not what you want to happen every day but new research reveals that many businesses are being faced with accepting losses on money owed to them.

Alternative finance continues to be a growing source of finance for small businesses and a new survey from Deloittes shows how many businesses are aware of it and intend to use it to fund growth plans. The findings suggest there is scope for improvement.

If you would prefer to listen to the podcast version you can click below or download to listen to later via our Soundcloud, Stitcher or itunes channel.

With news that the Bank of England has reduced its Base Rate and an announce of a new scheme to get banks lending and businesses borrowing, in this edition of the Business Finance Bulletin we look at whether these will have the desired impact.

We take a look at the findings from a survey carried out by the British Chamber of Commerce and Bibby Financial Services which reveals low awareness levels of the sources of alternative finance amongst UK SMEs.

Have you been faced with writing off a debt owed to you following being hit by a late payment of an invoice? The latest Bibby’s SME Confidence Index suggests that too many businesses are writing off debts and the average sum involved is not small.

If you would prefer to listen to the podcast version you can click below or download to listen to later via our Soundcloud, Stitcher or itunes channel.

In the latest episode of the Business Finance Bulletin we look at the continued fall-out from the Brexit vote; how the Bank of England have taken actions to boost bank lending and lender’s appetite to support UK small businesses.

We review the latest quarterly Small Business Index survey released by the Federation for Small Businesses which, although prepared before the EU Referendum, indicates that business confidence was already slipping.

Does late payment have an impact on productivity? The answer is revealed in a survey carried out by Xero, the online accounting software provider, which also reports on how many days per month business owners spend on chasing late payers. What a waste.

If you would prefer to listen to the podcast version you can click below or download to listen to later via our Soundcloud, Stitcher or itunes channel.