CBILS Case Study: getting CBILS when the bank said no
Funding a lifeline for a linen supplier - how two CBILS loans were better than one
TL:DR Not many businesses will come out of Covid completely unscathed. When a specialist linen supplier was struggling to keep their business afloat, their bank would only offer a Bounce Back Loan of £50,000. We stepped in to find a way to provide £500,000 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.
Covid has been responsible for big changes in every business sector. Some have been able to continue to work - others have been shut down completely. These sectors - and the suppliers that depend on them - are facing the biggest challenges of all.
“We supply linen - tablecloths and napkins - to restaurants, hotels and events caterers. The lockdown meant that we went from being very busy to doing nothing overnight - and even when things started to ease, and the hospitality industry was allowed to open and start working towards recovery, our recovery was lagging a very long way behind.”
The leisure sector has been particularly hard hit, with all bars and restaurants shut down for months under the lockdown rules, and hotels in a similar position. It has meant major problems for businesses that work providing the sector with the supplies it needs - including linen.
We were approached by the owners of a London-based linen hire business who found that the Covid crisis meant severe cashflow problems for them.
The costs that needed to be covered
The two partners had built up a business over several years and had established a long list of clients across London. It was growing fast - until the lockdown forced their customers to shut their doors.
“Before Covid-19 hit, we had plenty of business and no money worries. As soon as the crisis hit, things were the other way around.”
With a salary bill alone close to £1m per year, the problems were severe. The owners went into survival mode, stopping any unnecessary expense and taking full advantage of the government scheme to furlough staff. They applied to their current lenders for a payment holiday, which was agreed - but it would not be enough to keep the business afloat.
The business went to their bank to ask about funding from the government schemes - particularly the Coronavirus Business Interruption Loan Scheme - or CBILS.
“Our bank manager seemed to be helpful, but when we saw him, he suggested that a Bounce Back Loan might be the best that he could do.”
CBILS vs Bounce Back Loans
Both Bounce Back Loans (BBL) and CBILS are government-backed schemes to provide financial support to businesses across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak. The actual funding is provided by high street banks and other lenders on a commercial basis, although the government will support the loans, which should allow businesses which would otherwise fail lenders' affordability criteria to secure the funding they need.
However, there are some crucial differences between them.
CBILS can provide loans of up to £5million, and have recently been extended to repayment terms of up to 10 years with nothing to repay for the first 12 months. As a large-scale funding product, they can take time to arrange - when the scheme was announced back in April, delays of a month or more were common - this has been reduced as the banks and other lenders providing the schemes have found their feet.
Interest rates will depend on the lender and are uncapped.
The Bounce Back Loan Scheme (BBLS) allows smaller businesses to access finance more quickly during the coronavirus outbreak. The scheme helps small and medium-sized businesses borrow between £2,000 and up to 25% of their turnover, and the maximum loan available is £50,000. It is designed to be faster to access than the government’s CBILS initiative, but the big difference is the interest rate which, unlike the uncapped rates offered by some lenders under CBILS, is capped at just 2.5%. The length of the loan is six years but early repayment is allowed, without early repayment fees.
This means that finance secured under a BBL could cost much less than that under a CBILS loan. As businesses start to emerge from the crisis, these lower costs can make a big difference to their long-term viability.
Which funding did our client need?
The partners believed that a Bounce Back Loan would be insufficient for their needs - but their bank was reluctant to help with progressing an application for CBILS.
They turned to us at Rangewell instead - and our Covid Crisis Funding Team went to work.
We looked at the scale of their financial commitments and agreed that £50,000 - the maximum that can be provided under BBLS - would not be nearly enough to cover their commitments.
The scale of their business commitments and the depth of their cashflow problems would require a loan closer to £500,000.
We have found that many businesses need help not just with getting funding to help them through the crisis, but to understand the most appropriate type of government-supported funding to use. As the UK leaders in business funding for the SME sector, we are in the ideal position to help.
The solution we provided
We looked at the business and the partners' funding and saw that one of the reasons for their bank's reluctance to help was the fact they already had considerable lending, and a large CBILS loan would exceed their limits.
We saw the solution would be to apply for two CBILS loans, of £250,000 each, placing one with a different lender. This would satisfy the lending criteria of the partners' current bank, and provide a way to secure all the funding necessary.
“Rangewell helped us to take care of all the details with both applications. They explained how to complete the forms, what supporting documents we would need - and used their contacts to speed things along.
We have seen many business owners, including our customers, forced to wait for the funds they needed. We didn’t have to wait, and with the funds in our bank, we are ready to ramp up as restaurants slowly open again.
We have the funding that we need to stay afloat - especially as there are no repayments to make in the first year.”
The funding Rangewell secured
£500,000 over 60 months at 4.9 % interest
Repayment holiday for the first 12 months
Rangewell finds the financial solutions that your business needs
The Rangewell Covid Crisis Service is easy to use - and lets you talk directly to a funding expert to get the solution that your business needs.
Just call us and one of our Business Funding Experts will be able to discuss the options, and work out the most cost-effective ways to provide the funding you want - whatever challenge your business plans present.
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.
Calling us saves you valuable time - and it could help you save your business.
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