By Steve Richardson, director, Reparo Finance (www.reparofinance.co.uk)
At Reparo Finance, we understand the value of timeliness that exists amongst hospitality operators when obtaining finance. Many businesses throughout the sector are small and medium sized enterprises (SMEs) and accessible financial injections have become even more critical during the disruption and uncertainty caused by the pandemic.
With this in mind, we worked with Sapio Research to survey more than 200 SMEs nationwide to explore how they were accessing finance when it is needed and whether the Coronavirus Business Interruption Scheme (CBILS) is adequately supporting their needs.
The findings highlight a lack of understanding amongst businesses about what alternative finance options are available to them, with some incorrectly assuming that government-backed schemes are the only choice.
Although government-backed loans have had some success, with 52% of SMEs that applied for a CBILS having secured funding, the research ultimately shows that more support is needed to help ensure that viable businesses have a future.
Here are some of the key findings from our research:
COMPANIES STILL REQUIRE FINANCIAL HELP TO ADDRESS THE PANDEMIC
According to the results of the survey, 85% of respondents say their company still requires financial help to address the impacts of the pandemic. Of those who applied or started an application for a CBILS loan, 48% have yet to receive any funding.
Even among those who were successful, 93% reported that they experienced a struggle during the application process, from not knowing if they would be eligible to finding the process too time consuming and complex.
This shows us that government-backed loans are not straightforward to apply for and aren’t suitable for all companies.
MANY BUSINESSES SEEKING CBILS ALTERNA- TIVES
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 con- sider looking in the future.
This willingness not only reflects the urgent need for finance, but it also shows that businesses are open-minded about their options.
UNCERTAINTY AROUND OTHER OPTIONS
15% of businesses surveyed said that they were unlikely to consider alternatives to CBILS.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.
Others felt that their time and effort would ultimately be wasted and that traditional lenders like banks would reject their applications.These figures serve to highlight the need to educate SME leaders on the options available to them, so that they can make an informed decision should a traditional lender turn them down.
ALTERNATIVES ARE MORE ACCESSIBLE
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.
This once again shows that SMEs are willing to consider a range of finance options, as well as a sense that banks may not be the most suit- able route available to them.
LENDERS CUT BACK
Our research focuses on SMEs’ experiences; however, it is clear that lenders are going to be more cautious over the coming months, especially towards 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.
CONCLUSION: ALTERNATIVE FINANCE HAS AN IMPORTANT ROLE TO PLAY
With banks not fulfilling the need and CBILS causing confusion, businesses and finance brokers need to be open to other options and find bespoke solutions for those customers most in need.
Our research proves that there is a growing demand for SMEs to be connected with lenders that are able to provide tailored solutions.
This is where alternative finance providers can play a role.They have the experience and know-how to seek a practical solution, rather than relying on clinical computer algorithms.
They won’t shy away from urgent or challenging applications that don’t fall into traditional lenders’ criteria.
They work with SMEs on a case-by-case basis, assessing individual circumstances and finding ways to make financing their business possible.