Sleepless nights

Post pandemic, the big thing keeping many business owners awake at night is likely to be cash flow.

During the pandemic the government supported businesses through many initiatives. These included the Bounce Back Loan, the Furlough Scheme, VAT/PAYE deferment and the Coronavirus Business Interruption Loan Scheme, more commonly known as CBILS. Many family and owner-managed businesses often had little choice but to make use of these schemes, giving little thought to future cash flow and repayment when the pandemic restrictions came to an end.

We are now seeing numerous businesses with serious cash-flow pressure as the repayment of these initiatives fall due. CBILS were often agreed over a five year term, making the repayments pretty aggressive. This, combined with creditor pressure, as terms of trade agreements change, as well as the challenging credit insurance market, has left businesses wondering what help can they get now.

What are the options?

For any business experiencing cash flow pressure, their first port of call should be to ask their bank:

• can more working capital be provided
• can existing borrowing facilities be re-structured to ease cashflow
• can a CBILS repayment schedule be termed over 10 years instead?

Alternative funding

Many lenders are in the market offering a range of finance products, not just loans but creative working-capital solutions.

The Recovery Loan Scheme (RLS) remains available until the end of June 2022. This is the government's follow up to CBILS. Some of the features of the scheme are shown below:

• The finance can be used for any legitimate business purpose.
• You can borrow under the scheme even if you have already borrowed under other schemes (CBILS, Bounce Back Loan). In certain circumstances though the amount a business can borrow may be restricted.
• Currently, a lender can provide up to £2million as a term loan, overdraft, invoice finance or asset finance.
• Business turnover must be below £45 million.
• A government-backed guarantee of 70 per cent of the debt will be provided to the lender although the business remains 100 per cent liable for the debt.
• Personal Guarantees are not permitted if a business borrows below £250,000.

So where can you go to get an RLS? Again, it is always sensible to ask your bank first. However, there are many lenders who are accredited to lend under the scheme who can provide the finance without you needing to move your day to day banking.

We are experienced at navigating our way through the debt market, finding the right cashflow solution for your business. For more information, or to request a free ‘borrowing health check' to help sense check whether the funding you currently have in place is fit for purpose, get in touch with Julie Mole, debt advisory director at Crowe julie.mole@crowe.co.uk or 0121 543 1900.