CBILS Case study: How a chiropractor's set up caused difficulties
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TL:DR Many types of business have been hit hard by Covid, and CBILS loans have been developed to help. When a chiropractor attempted to arrange CBILS for his practice, he ran into problems with the way his business had arranged its banking - his was a limited company, but his bank operated as though he was a sole trader. At Rangewell, we found a way to deal with the problems and provide the £100,000 he needed with CBILS funding.
Urgent update: The government has announced an extension to the deadline for CBILS applications, which will now remain open until the end of January 2021. Don’t miss out on the government-backed funding you must have - call us now.
The financial impact of Covid has already been felt by every business sector and with a new lockdown and more financial hardship to come, even those sectors which expected to be largely unaffected by the emergency are starting to need financial support - and additional finance.
We recently helped a chiropractor whose practice had run into problems as a result of Covid - but who faced additional challenges because of the way his business had been structured as it developed over the years.
“Your success as a chiropractor depends on your professional skills and your ability to bring relief and healing to your patients.
People come to me in pain, and sometimes unable to perform even simple tasks, like tying their shoes or even walking, because of the pain or the inability to make the usual movements we all take for granted.
I help reduce the pain and help them regain their mobility. It’s all a matter of spinal manipulation - hard to explain without going into anatomy and physiology - the important thing is that it works for many people who have suffered accident or disease.
But of course, if you have a practice to run, you need to be a businessperson as well as a therapist.”
Like any business, having control of your finances is vital to your success. With premises, a receptionist and marketing to fund, as well as the usual overheads, the practice had a steady drain on resources. In more normal times and with plenty of patients coming through the door, this was not a problem - but the Covid crisis changed all that.
As a recognised medical treatment, chiropractors were allowed to continue to practice during lockdown, providing vital treatment - but client numbers were drastically reduced.
“I still had some regular clients coming in for treatment, and I had worked out ways to provide it which should minimise the risks of contagion. But people were wary of going out at all, particularly the elderly and those with medical problems who might be at additional risk from Covid. But that meant that my takings were down. I had a cashflow problem developing as soon as lockdown was announced. The money was still flowing out, but it just wasn't flowing in any more, at least not in the quantities I needed to cover the outgoings.”
He made full use of rates and VAT holiday arrangements, but he saw that a shortfall was looking increasingly severe and looked around for a solution.
Like many other small business owners, he saw that the government's Coronavirus Business Interruption Loan Scheme - or CBILS - could be a lifeline for the practice.
“Nobody had any idea how long lockdown was going to last, or how long it was going to be until things started to get back to normal. With bills to pay, I saw that CBILS might provide a good way to ensure that I could pay them.”
CBILS is a government-backed scheme, set up to provide financial support to smaller businesses across the UK that were losing revenue and seeing cashflow and takings disrupted as a result of the COVID-19 outbreak. The scheme is able to provide loans of up to £5million, and crucially, with nothing to repay for the first 12 months.
It can be the ideal solution for businesses of all kinds that find that their orders have been put on hold because of the lockdown.
However, CBILS is provided by commercial lenders, and although the government scheme will reduce the risk of lending, it cannot altogether remove it.
Lenders will, therefore, lend under their own lending criteria. When the practice owner approached his existing lender for help he found that the way he had been running his business had left him with a problem.
“The problem was that I was running a limited company - I had been for a couple of years. But I was still using the same business bank account that I had when I set up the business - and when I was running it as a sole trader.”
What was the problem?
Applying for CBILS funding can be complicated Many banks and other lenders have a long and complicated checklist as part of their approval criteria. Any business that cannot tick all the boxes may be marked out for requiring further investigation, sent to the back of a very long queue - or even refused a loan altogether.
The chiropractor was distressed to find that his bank would not approve him for a CBILS loan. It had allowed him an overdraft and other refinancing in the past, but would only explain that his business was not suitable for lending.
He approached us at Rangewell for help.
Our experts called contacts at his bank and found the cause of the problem. His bank account was for a sole trader - he had not upgraded it when he had set up as a limited company after a few years of successfully running his practice.
His accountant had explained the advantages of working as a limited company - in terms of tax and a reduction in potential liabilities - but although he had also explained the need for an appropriate business bank account, our client had not arranged to update his details.
“There were plenty of other demands on my time than dealing with obscure forms from the bank and, if I’m honest, I didn't like the idea of paying increased charges for what I saw as the same service. So I still had a sole trader’s bank account, even though I had not actually been a sole trader for a couple of years. It had been easier then - but it was causing me a major problem now.”
We looked at ways of dealing with the problem. Upgrading the account would be relatively simple. We have a number of people on the Rangewell team with experience as bank branch managers, and we know the steps required.
We could help our client ensure that he upgraded his account - but we knew that this would not be enough to solve the problem.
In order to apply for CBILS, he would have had to be already running his business, with his new account, and he needed funding now.
Dealing with a crisis
However, we knew that there could be a way out of the dilemma for our client.
He needed time to upgrade his account, and for evidence that he was using it for his business, with payments from clients coming in and payments to suppliers, his landlord and others going out.
It would take a week or two to upgrade his account, and at least a month for the necessary activity to take place within it - and during that time his practice would still be desperately short of the funds it needed.
During that time, we would arrange a short-term loan from a lender specialising in distressed businesses. Despite the fact that our client was having difficulties with his practice, the fact that he would be fully eligible for a CBILS loan in around six weeks time would mean that the lender would be able to advance funds for the short-term without worries about affordability, or the ability of the practice owner to repay.
Once the CBILS loan was finalised, the short-term loan could be paid off, and the CBILS funding used to keep the business afloat.
With nothing to repay for 12 months, the chiropractor should be back in control of a thriving practice by the time repayments become due.
“Rangewell have been very clever in getting me out of a crisis of my own making. I will have to pay a little extra for a short-term loan, for a few weeks, but with the right timing there should be only one interest payment to make and they have seen to it that there is no penalty for early repayment.
Then the CBILS loan can come in, deal with the short -erm funding and take care of the practice until things start getting better. I’ll have nothing to pay for a year, and I know that patients will be back by then, whatever happens with Covid.”
The solution we provided
We have found that many smaller businesses will need help, not simply to get through the crisis, but to access the funding the government has promised. As the UK leaders in business funding for the SME sector, we are in the ideal position to help. Our expertise in every sector means that we can find solutions when going direct to a lender will only mean problems.
“Rangewell’s expertise helped me at every stage - restructuring our finances, which lender to approach, how to complete the application, what supporting documents I would need - and made sure I got the funds I needed.
CBILs is ideal for us. It makes borrowing a lifeline affordable - especially as there are no repayments to make in the first year.”
The funding Rangewell secured
£100,000 over 60 months at 7% interest
Repayment holiday for the first 12 months
By making use of the government's guarantee under CBILS, the lender was able to offer the loan with 5 years to repay - after the initial 12 month repayment holiday.
Rangewell finds the financial solutions that your business needs
Whether you are a chiropractor or other medical professional with a practice to run, or someone with a business in any other field, it's more than likely that Covid is causing you financial problems.
The Rangewell Covid Crisis Service is designed to provide the solution.
Government loans - such as Bounce Back and CBILS - can offer a solution in many cases, but if there is a problem, or if another solution may be better for you and your business, you can rely on our experts to work with you to find the solution.
We are completely independent, and we know the entire lending market. That means we can take a view that will put your interests first - and if you have been faced by challenges that your bank can’t deal with, we will work to find solutions and lenders that can provide answers
At Rangewell we work to find the financial solutions you need to beat Covid - not excuses
Call us - we can help you see if a CBILS or Bounce Back Loan could provide the answers you must have and streamline your application - or whether there is another form of funding which could provide a better answer for your particular circumstances.
Then we will search the entire lending market to find the most appropriate lender and to make the application for the loan you need.
Keeping your business afloat with help from Rangewell
- Individual arrangements tailored to your circumstances
- Adverse Credit – no problem
- Repayments geared to your turnover
- Expertise in funding for your sector
- Bounceback and CBILS expertise
Talk to Rangewell – the business finance experts