SMEs still need finance to fill funding gap

Steve Richardson is sales director of Reparo Finance


The majority of SMEs are still struggling as a result of the pandemic, with 85% of those that have applied or started an application for the Coronavirus Business Interruption Loan Scheme (CBILS) still in need of financial support.

In these challenging economic times, it is vital that SMEs understand the accessibility of the financial support options available to them.

That’s why we’ve published new research investigating their experiences in applying for CBILS. Specifically, the research looks at the ease and timeliness of obtaining financial support when it is needed and whether government loan schemes are delivering for the businesses whose livelihoods depend on them.

The research revealed that most (85%) SMEs which started a CBILS application are still in need of financial support. This is due to issues such as doubts over eligibility and the application process being too time consuming.

Of those SMEs which applied or started an application for a CBILS loan, 48% have yet to receive any funding.

The findings also highlight a lack of understanding amongst SMEs over what alternative finance options are available to them, with some incorrectly assuming that government-backed schemes are the only choice.

With many businesses struggling to get the financial help they need, some are looking to other forms of borrowing. 20% of our sample had already explored other options, while a further 65% were likely to consider looking in the future.

The remaining 15%, however, were unlikely to consider other options. The two primary reasons for this were uncertainty regarding the other forms of borrowing available and the belief that there was no other way of raising finance to support their business.

So, what’s next for those looking for alternative financing? While 29% planned to explore the options with their current high street banking provider, 76% also planned to look elsewhere.

There is a general feeling that alternatives to high street banks are often more accessible, but many businesses are conflicted due to concerns about higher costs.

A minority did not plan to borrow at all, but instead intended to sell personal or business assets, or seek help from friends and family.

Lenders are going to be more cautious than ever over the coming months, especially to those lacking a clear plan for how their business is going to remain profitable.

With so many businesses struggling to secure finance through CBILS, lenders have been overwhelmed with the demand and are taking much longer than usual. Many financial institutions have also cut access to Bounce Back Loans for new customers amid a huge surge in applications — even though they may be entitled to one.

It’s clear that with banks not cooperating and CBILS causing confusion, businesses and finance brokers need to be open to other options—in this case, alternative finance.

About the research; Sapio Research surveyed more than 200 SMEs in October 2020. Respondents were senior decision-makers in organisations employing less than 250 people who had applied or had started an application for a CBILS loan. Interviews were conducted online.

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