BTG Advisory - Could the government pivot to a regional-focused SME lending programme post-CBILS?

3rd December 2020

BTG Advisory, Partner, Karl Hodson gives an update on what may be introduced after the Coronavirus Business Interruption Loan Scheme.

After Prime Minister Boris Johnson reluctantly announced a second national lockdown in England on Halloween to suppress the second wave surge in coronavirus cases, Chancellor Rishi Sunak responded by extending the government’s flagship loan schemes. It was perhaps inevitable, but the current extension may be the last.

All three loan schemes were extended to the end of January 2021 – the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Bounce Back Loan Scheme (BBLS). By mid-November, these schemes had provided £65.5bn in government-backed loans to almost 1.5 million SMEs. But ahead of next January, the government must decide how to evolve its policy to support SMEs. By our assessment, there are four options open to the government. These are: (i) further scheme(s) extension, (ii) a reversion to the Enterprise Finance Guarantee (EFG) regime, (iii) amendments to the CBILS programme, or (iv) to adopt a regional approach.

An extension to the existing schemes will likely be dependent on the scale of the unfolding second wave, the arrival and distribution of the newly announced vaccines, and public compliance to lockdown restrictions in the interim. A return to the old EFG scheme we consider unlikely. Simply put, the EFG regime was not designed to support the scale CBILS has become. We also expect the popular Bounce Back Loan Scheme to be retired. This ‘light touch’ regime served its purpose at the height of the first wave of the pandemic, but with almost no due diligence and 100% government backing, the scheme could see high loss rates. The third option of making amendments to the existing CBILS scheme is certainly not something that we would rule out. The government may prefer to tweak the CBILS framework and maintain a nationalised scheme. However, it is the fourth option – pivoting to a regional strategy – which we consider the most compelling option available to the government. The remainder of this article explains why. Read full article.

If you would like to talk about your financing options, do get in touch with one of the BTG Advisory team today and they will do their best to help you navigate the uncertainty. Contact them here.