Current thoughts on lending since lockdown…
Managing Director, Dan Smith, gives his thoughts on lending since the lockdown in his latest blog….
Three weeks of isolation later and new routines are quickly becoming the ‘new norm’! Some are definitely for the better like work/life balance and family walks, but some are not so good such as an empty wine rack and a large amount of snacking!!
Funding is no different and lenders and banks are taking the time to take stock and assess the situation, their own balance sheets and their funding lines (I will specifically get to CBILS shortly). The property side of finance has seen a number of lenders pull out of the market due their funding lines stopping, some want to reassess LTV’s and pricing (risk) and the others just want to go back of having the comfort of a 3rdparties P.I. to rely on! All of which has made the last three weeks very difficult to advise with any certainty.
The trading business and cashflow lending side of the market has also seen similar changes. Again some have pulled out/stopped and have advised accordingly, some say they are still lending but are not actually sanctioning anything and some are trying to understand the problem for SME’s and taking a commercial view (not many).
There will be a change once the lenders have got their heads around remote valuations, remote MS/QS sign offs and cashflow concerns (probably a step back in time, where you trusted the borrower to perform). We are seeing some lenders already implementing these changes now, which is good. The pipeline in the property sector will be vast. So I can see a big influx of business and transactions once the ‘lock down’ period relaxes (obviously with some social distancing measures still in place). Those lenders who have supported clients during these times will start seeing the better deals.
This brings me to CBILS……………
A lot has been written about the scheme so I won’t go over old ground too much. It is obvious to any non-banking/business people that this will only help a small number of SME business in the UK. It is good to see more lenders being accredited to the scheme, with more to join shortly I believe. This should help speed up delivery of the loans and get to more business than it is currently doing, but can’t help think this is not ‘fit for purpose’ and has been delivered by those who are not really at the coal face of running a SME business.
A lot of applications are waiting to be seen, we know of a fair few that have been declined and probably should have been supported, but the bank manager hasn’t got the time to mould the credit application in favour of the client. Don’t shout to much at the bank manager as they only have one pair of hands and only so many hours in a day. They are fielding an unprecedented number of calls around CBILS, capital holidays and emergency overdrafts that they have drafted in the new business teams (as there is no new business) and other departments to help assist the frontline staff.
Maybe a better idea would be for business to work out what the overheads/costs for the previous 6/9 months run up to March 1st 2020 and this be the amount they receive. This to be done on a 10 year loan and 100% backed by the government. I’m sure they would reach the £3.3bn milestone a lot quicker plus it may help business pay creditors to keep the world moving. I appreciate this won’t work for everyone as it may be hard to determine that number but to work out an average is surely better than the current process?
So as you read this we have probably just been told we are on ‘Lock Down’ for another three weeks; so back to home schooling, keeping up to date with lenders appetites and policies and run a small business. Life will seem so easy once we get back to being allowed out!
If anyone wants to have a chat about anything to do with their finance or specifically CBILS please do give us a call or email. We have noticed a lot of business just appreciate someone to discuss their options with or at worst vent their frustrations that their incumbent bank has not supported them.