CBILS applications to surge by 84% for winter survival

Government-backed Coronavirus Business Interruption Loan Scheme (CBILS) applications set to soar as business loans dwindle and cash flow dries up, according to MarketFinance

The Chancellor of the Exchequer, Rishi Sunak, detailed the onset of the economic emergency facing the UK at last week’s spending review.

This comes at a time when demand for the government-backed CBILS loans are planned to rise as the original loan runs out.

Of the businesses that applied for a Bounce Back loan (up to £50k) during the summer, they now have only £3,150 remaining and estimate that will see them through to the end of this week.

More loans

Since the announcement of the second national lockdown measures, 84% of businesses will be applying for CBILS loans. They indicated this would be used to protect them over prolonged lockdown measures and in anticipation of more bills, taxes or duties to pay.

In addition to this, more businesses know they can refinance their Bounce Back Loan with a CBILS loan - up from 68% two months ago to 83% today.

Anil Stocker, CEO of MarketFinance, said: ‘The stop-start government announcements on lockdowns haven’t helped UK businesses.

‘However, they continue to fight on and will, naturally, require more funds to bolster them through a tricky winter period.

‘Looking ahead, ultimately, it will be the private sector which will enable the Chancellor to get the country’s finances back under control, so business leaders will be looking for some pro-growth, pro-enterprise stimulus measures in time to come.’

Cash flow

Two in five businesses (42%) are still waiting to be paid for work completed since the first lockdown. In June 2020 they were, on average, waiting for £148,917 which came down to £33,906 in September, but there is still £27,134 outstanding to them.

Two-thirds of businesses reported waiting longer to be paid. One in five (20%) reported their payments terms from customers have been renegotiated to three months or more. Businesses in Wales and those in the leisure, marketing and telecoms sectors have been the hardest hit, in terms of longer waiting times to be paid.

As businesses get paid later, half (49%) are withholding payments to suppliers fearing cashflow worries and future economic shocks. Meanwhile, a third (35%) reported they are intentionally stockpiling cash reserves to safeguard their companies over the winter trading period.

Stocker added: ‘We are witnessing a cash vacuum in the economy. Businesses are waiting longer to get paid and in turn are holding out on payments they owe.

‘They are in desperate need of funds and support from the government. A well-oiled engine will keep the economy pumping and small business alive.’

Winter crisis

The future for small businesses seems desperately uncertain. Over a quarter (27%) felt they would not survive to see 2021 based on their current cash balances and anticipated a reduction in revenue over the winter months.

A further 34% were uncertain, but if cash flow improved and they had an exceptional end to the year, they could make it.

Only 27% were certain about survival in 2020. Older business owners and those based in London and the south east were the most optimistic.

Small business owners reported a cash injection of, on average, £52,800, would help them see through the winter trading period.

The research findings conducted by MarketFinance are based on a survey of 5,000 UK companies, who are employers with a minimum turnover of £250,000. The study was conducted in November 2020 (after the announcement of the second lockdown).

Further reading:

Spending review: ‘economic emergency’ sees GDP fall 11.3%

MarketFinance business insights

Zak Jakubowski |Reporter, Accountancy Daily [2019-2021]

Zak Jakubowski was a reporter at Accountancy Daily, published by ...

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