British businesses need access to grants, as well as loans, as taking on ever more debt will make them over-levered;
The Government should consider an emergency eight-week cash flow grant for previously viable businesses, as well as simplifying the CBILS;
Providing loans requires significant credit analysis from the banks on the Scheme who don’t have the capability to do this quickly and are already overwhelmed by current demand;
Understandably, the Government needs to protect its balance sheet and tax-payers, so OakNorth Bank is suggesting several changes to CBILS to make it more effective;
OakNorth Bank hopes to be onboarded to the Scheme in the coming weeks.
OakNorth Bank’s suggested changes to CBILS for it to have the desired impact:
- Loans should be subordinated to any current lending;
- The maximum term of loans should be increased from 6 to 10 years;
- The Government should take first loss on the loans, with banks taking 10% of risk, to encourage banks on the Scheme to move more quickly;
- Complex structures should be removed – the fact that lenders need training by BBB to use the scheme illustrates the complexities. For example, to simplify credit decisions for banks and to speed funding for businesses, guarantees should be broadened and claims caps should be removed;
- The business turnover limit should be increased from £45m to £200m, and the maximum loan amount increased from £5m to £10m, to ensure that medium-sized companies, who are too small to apply for CCFS, are protected;
- SME house-builders and developers of vital buildings such as care homes, hospitals and affordable housing, are having to deal with their construction sites being closed, debts racking up, pre-sales falling away, and values falling. All of this will significantly impact this sector and destroy previously viable businesses and exacerbate the UK’s housing crisis further. In order to protect these businesses and ensure the UK is able to continue working towards closing the housing gap once the Covid-19 crisis has passed, they should be eligible for CBILS.