Shaw & Co, a Bristol-based corporate financial and business consultancy suggests that the proposed Coronavirus Business Interruption Loan Scheme (CIBLS) is flawed and while clearly a step in the right direction, does not address fundamental issues that will make it as successful as the Government would hope and will protect only a fraction of those businesses and jobs it is intended to.
The scheme, Shaw & Co contests, is effectively the same as the Enterprise Finance Guarantee (EFG), clunky to access and probably not scalable given the widespread concern around current conditions.
Jim Shaw, founder and CEO of Shaw & Co, commented: “As active practitioners in the SME funding space, we applaud the clear determination of this Government to ‘Do Whatever It Takes’ in fighting the damage this crisis is inflicting on people’s health and our country’s businesses, jobs and prosperity.”
“However, we were left entirely underwhelmed by the proposals as the impressively big number of £330bn was only to be lent to the UK companies and only through mechanisms, which we believe are doomed to be largely ineffective. It is not just a question of throwing money at the problem, it is vital that businesses have quick and efficient access to finance and the measures are not blighted by bureaucracy.”
Among the key points the Company believes the Government needs to give significant further thought to, include:
- The proposed scheme still leaves a high burden of risk on lenders which will be passed on to SME owners. 20% of the loans will need to be secured (Government only guaranteeing 80%). Lenders will want security.
- The scale of economic uncertainty means SME owners are unlikely to want to take on more debt.
- How long will it take for the funds to be made available?
- We think the scheme should be 100% guaranteed, better still a grant (a repayment scheme similar to student loan repayments could be a better option)
- Increasing corporate tax could fund the grants