Are Banks and Lenders coping during Coronavirus?

It’s safe to say that 2020 has been a year of unprecedented uncertainty. Within the business world, this is particularly pertinent. In a bid to reassure and assist companies, the Government have launched a number of initiatives to assist SMEs in the resulting economic crash caused by COVID-19. Further, banks and lending bodies have been told keep lending like normal to companies in need. This is seemingly good news - but is it all too good to be true? The lingering incertitude left in the wake of the pandemic, has caused many people to question the security of taking out business loans right now. 

So, if you’re a business looking to borrow money, you’ve probably been wondering how lenders have been coping with the Coronavirus crisis. 

You’ve maybe got questions on your mind, like: 

• Are institutions still lending? 
• Are any lenders failing in the economic crash? 
• Are there any lenders thriving? 
• How do I choose the right lender?

So, if you’re thinking about applying for funding during this pandemic, you’ve come to the right place for information.

Are lenders still lending?  

Yes! 

Lenders are lending. “How?!”, I hear you cry. Well, this is because the lenders that support SMEs are themselves being supported even more by institutions like the British Business Bank. The lenders are being supported through government-backed initiatives and these trickles down to business owners like you. For example, lenders are cushioned by partial guarantees, meaning that the government will cover lenders for up to 80% of what they lend. If the clients default, the lender can be assured that they will get 80% of their money back - incentivising the lenders to still lend to folks like you!

Further, the government will also help you the SMEs by making sure that the lenders cap their interest rates at 20%. (Still sound like a lot? Don’t worry, most lenders will charge between 2-8%, but it’s still good to have an upper limit in place.)

And while this doesn’t necessarily mean that you should start panic-buying loans just because they’re cheap at the moment, it is positive to see so many financial institutions working with the Government, attempting to minimize the potential long-term financial damage of COVID-19.

Everyone wants to see as much economic recovery as possible, for both individuals and businesses, and so, The Bank of England has implemented the following measures: 

• Capping interest rates to 20%. Cheaper loans for everybody!
• Helping banks and building societies to cut their interest rates by subsidising them with funding. This means that banks can also increase their funding support to SMEs. 
• Helping large businesses with cashflow problems pay their staff and suppliers. 
• And helping banks to expand lending by getting banks to freeze their dividends payments to shareholders. Basically, this means that senior staff within banks will not get cash bonuses, saving the banks money, which they will spend instead on SMEs. 

This single initiative will raise up to £190 billion, which should be injected back into businesses. This is actually 13 times more than the net amount that banks lent in 2019.

Are any lenders going under?

A complicated question, with a complicated answer. Sort of yes, but also overwhelmingly, no. 

Lenders haven’t ‘gone under’ as a result of Corona, but a lot of them have just temporarily pulled out the market and stopped lending to new businesses, in order to give their full attention and focus on their existing customers. The reason? Well, as with most things - because Corona is bad for business. This is because of the capped interest rates. Investors want a good return on investment, and the lower interest rates aren’t as attractive, so some investors have temporarily stepped away from accepting new business. This, however is only a problem if there was a very specific investor that you wanted to secure pre-COVID who has since backed out. But the good news is they’ll be back, and for now, there are plenty of other lenders out there looking for investees. 

The even better news is that the overwhelming majority of lenders haven’t backed out. In fact, in the present financial landscape, lenders are more worried about you - SMEs - being unable to repay their loans, rather than themselves going under. (This is because the lenders feel confident due to the large aforementioned support from the government and Bank of England.) And in order to help you as much as possible, the lenders have even set up new payment plans or put people on payment holidays to ensure nobody has to default. 

So what does this mean for you? Well, this means that whilst 2020 with it’s many many challenges may not be ‘business as usual’ for your company, it does mean that you are more likely than ever to qualify for a loan - especially if you are an eCommerce company. Wahoo! This should come as a relief for those of you who are looking for a some financial support at the moment. Loans are available, and you can get your hands on them fairly routinely, especially when you have someone like to help you navigate the process. 

By connecting you with the best loans from qualified lenders, Business Score will help encourage the success and survival of your business throughout this pandemic. 

Are any lenders thriving?

The government introduced - amongst other things -  the Bounce Back Loan Scheme (BBLS) - in order to keep high-street lenders lending, if not thriving. The government-owned British Business Bank is advising lenders to proceed as usual, despite charging no interest and nothing due within the first 12 months which are extraordinarily good terms. In fact, lenders that are lucky enough to be CBILS accredited, have been busier than ever with more applications coming through than ever - so for them, business is booming. 

Having said all this though, it is absolutely necessary that when you consider taking out a loan that you read the fine print. The terms of the BBLS are clearly stated and you need to understand them before you agree to them, since you will be held accountable. If you’re confused or need help - reach out to Business Score. Funding is our thing, and we are here to guide you through the sometimes tricky landscape of finance. 

How do I choose the right lender?

So you need finance to keep your business sailing smoothly through the high-seas of Coronavirus. You are reassured to hear that the lenders are lending - supported as they are by the Bank of England and the Government. They will be the tradewinds to navigate you to your destination. But which do you choose to use?

Firstly, while this pandemic may be bringing frightful times for eCommerce businesses, for the most part, choosing the right lender is not something you will have to worry about. Firstly, due to the BBLS, any lenders who have been supported by the British Business Bank will be offering the same terms and will have financial support from the Government to do so. So you can rest easy there. There is also a handy list of Coronavirus Business Interruption Loan Scheme (CBILS) Current Accredited Lenders and Partners available, so you have visibility as to who has been approved by the British Business Bank to offer these terms.

Secondly, if you’re still stuck or have any questions, you can be reassured that you have Business Score on your side. Business Score is here to help you choose a lender who is right for you - and we do it for free. Yes, that’s right, for free. 

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Get in touch with alex@scorethebusiness.com if you'd like to learn more!

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