Government loan scheme – urgent alternatives for businesses that don’t make the grade

7 out of 10 businesses fear they won’t survive the pandemic. The Coronavirus Business Interruption Scheme (CBILS) is supposed to help, but what if you don’t qualify? Don’t panic: there are other ways to raise money fast.

CBILS: not always the answer

CBILS is the government’s loan scheme for helping small to medium businesses through the Covid-19 crisis. It allows businesses (including freelancers and sole traders) whose cashflow has been affected by Covid-19 to access loans, overdrafts and other types of finance from a number of accredited lenders.

But only a small percentage of firms have actually secured funds from CBILS so far, with the British Chambers of Commerce reporting that 9% of businesses had failed to raise any money from the scheme.

It’s the main solution to cash flow problems that we’re hearing about, but many businesses are frustratingly finding themselves ineligible.

Over time, take-up of CBILS is likely to improve. But if you’ve already been rejected, you’ll need alternative ways to access funds. Now.

Alternative funding to CBILS

Samuel Harrison MAAT AATQB of SH Accounting Solutions Ltd says that so far, he’s been advising clients on looking at the government offerings. “As far as my business is concerned, I always keep aside extra funds for rainy days like this. However, if I did need to raise some money then I’d certainly consider alternative ways of finance as an option.”

We look at invoice finance and asset finance as alternatives below, which could be essential for getting through Covid-19 especially when paired with fintech lenders. Often offering much more flexibility and competitive rates, fintech companies are currently providing a lifeline to many. MarketFinance in particular have lent £2.9 billion to thousands of companies since 2012.

“As a fintech business lender, we’ve seen a significant upswing in applications from SMEs who haven’t been able to secure funding from traditional sources,” says Anil Stocker, Co-Founder and Chief Executive Officer of MarketFinance, and their quick online process sees funding delivered in days.

Key tip: Look beyond CBILS if you’re short of cash. And remember you’re not alone: other business owners and self-employed workers are suffering too.

1. Invoice finance

Invoice finance is a way of raising money from your outstanding invoices. So if your cash flow is dwindling but you’re owed money – and all attempts to get the invoices paid have so far failed – it could help by paying out quickly, rather than leaving you waiting for weeks.

There are different forms of invoice finance.

  • Invoice factoring is when you take on a factoring company to collect unpaid invoices (so customers will be aware that you’ve used a third party to raise invoices).
  • With invoice discounting you still chase your invoices and interact with customers, but the finance company lends you money against invoices which haven’t been paid. When your invoices are paid, you use the money raised to pay off the loan from the invoice discounter.

The pros and cons

The main advantage of either scheme is the potential for a quick boost to your cashflow: you could have money within a day or so, instead of weeks. Healthy competition between companies in this sector also means there’s lots of deals and options available to you.

One of the downsides with invoice financing is you’ll only immediately get a percentage of what’s owed on your invoice – say, 60-90%. Once the invoice is paid, then you get the remainder, minus fees.

To cover yourself if invoices aren’t paid, you can take out Bad Debt Protection when you sign up. With this, it will be up to the invoice finance company to seek payment on invoices where the customer won’t pay up. Without it, if an invoice is unpaid the finance company may hold you accountable. These are complex issues, however, and you will need to go through the details with the finance company if you’re interested in invoice financing.

If you opt for invoice factoring, your clients will be dealing with a third party company – the factoring company – which might negatively affect the way they view your situation. You won’t have any control over how they talk to your valued clients. That doesn’t happen with invoice discounting. On the other hand, your debtors might respond better to being approached by a factoring company than by you.

In addition, invoice discounting may demand better credit records than factoring as they’re lending you money against unpaid invoices, rather than taking over the invoices. But this is an ideal option if chasing invoices isn’t too much of a problem for you.

Some of the big names in invoice finance are Hitachi Capital Invoice Finance; Close Brothers Invoice Finance and Bibby Financial Services. All are open for business in these difficult times.

Key tip: Invoice financing is an option if you’ve got outstanding unpaid invoices and need the cash. But there are fees and you won’t get the full amount of your outstanding invoices. 

2. Asset finance

Your property, business premises, even your computers and office furniture are the assets of your business. They can be used to help you raise funds through asset refinancing.

While asset financing can be used to buy much needed equipment, asset refinancing lets you borrow against those assets. As it’s a secured loan (the security being the asset) it should be a cheaper way to borrow money if you are short of cash.

Does size matter?

Asset financing works for all sizes of businesses even sole traders, and deals can raise as little as £1,000. But as with any loan agreement, the finance company will have to know you can afford the repayments.

And what the asset is will determine what you can get: so called ‘hard’ assets like buildings may be easier to borrow against than ‘soft’ assets like furniture and electronics. In addition, asset finance is more of a long-term agreement than a quick solution to short-term money shortage.

However, it could be a cheaper way to borrow than others – because it’s a secured loan. That of course means that if you don’t make repayments, you risk losing your assets. Find the best deals through the Funder Finder tool on Informi.

Key tip: If you’ve got assets then you could refinance them to improve your cash flow. But remember that your assets are at risk if you don’t make repayments.

Look to fintech for financing

Innovation in technology has widened out the field for businesses seeking help with their finances. Companies including Crowdcube, Funding Circle and MarketFinance have taken a different approach to traditional lenders and for businesses feeling the pinch in the current environment, they offer an alternative.

With the very latest in financial tech, they can often turn deals around much quicker, or they can be open to more unusual business propositions than traditional lenders.

And they are certainly open to approaches from Covid-affected businesses.

“SMEs are crying out for cash and it’s worrying that so few know about invoice finance as an option,” says Anil Stocker, Co-Founder and Chief Executive Officer of MarketFinance.

“Ours is an ideal solution right now, enabling businesses to advance funds against their outstanding invoices through facilities that can be applied for very quickly online and which deliver funding within days. Since 2012, we’ve helped over 10,000 companies having lent them over £2.9 billion. They come to use us because we’re easy to work with and quick to get out lending fast.”

MarketFinance offers flexible invoice discounting plans – for example, you can have all, or just selected, invoices funded depending on your cashflow needs. So just like a mobile phone, you can choose whether to take out a contract, or ‘pay and go’. Get financing on a few invoices to tackle short-term cash flow issues, or take out a contract to deal with ongoing issues.

They provide business loans of up to £250,000 and could provide the funding within two days.


Crowdcube is a crowdfunding platform established in the UK in 2011. It’s aimed at raising money for start-ups, with BrewDog its biggest deal so far, raising £10 million.

The minimum you can raise is £50,000.

Darren Westlake, CEO and Founder of Crowdcube recently wrote on the shortcomings of CBILS saying: “The main problem …is that to be eligible the BBB (the British Business Bank) says a business must have a “borrowing proposal which, if it were not for the COVID-19 pandemic, would be considered viable by the lender”. A swathe of businesses who don’t fall into the lending categories defined by commercial lenders are excluded.”

Key tip: If you have clients who are planning to start a business, it’s worth looking at the crowdfunding option.

Don’t forget CBILS..

Just because you haven’t managed to secure CBILS help yet doesn’t mean you shouldn’t try again.

Fintech giant Funding Circle has just been approved for CBILS. It was set up ten years ago and is the UK’s largest small business loans platform. It has lent more than £6.2 billion to 57,000 plus UK businesses, raising funds from investors and lending out to businesses. It has just been accredited as a CBILS lender and will be taking applications from later this week.

Its UK Managing Director Lisa Jacobs said that CBILS “is vitally important for many small businesses affected by Covid-19 and we look forward to doing our part in supporting these businesses which are the backbone of the economy. We are working hard on finalising the legal and operational set up so we can start taking applications as soon as possible.”

The government launched an online tool on 22 April to help UK businesses, including the self-employed, to find the financial support available to them during Covid-19. It features a short questionnaire, which will signpost you to relevant government support. Click below to access the tool.

In summary

There are other options if CBILS doesn’t work for you. Invoice financing or raising money against assets are great options and you could look to crowdfunding too. Check out the Funder Finder tool on Informi, our sister site, to get a quick list of potential solutions.

Bear in mind that you aren’t alone: everyone is suffering in this crisis and there’s plenty of help and support on offer. Connect with your wider AAT community on the AAT Discussion forums to see how your peers are coping, or even get advice on specific issues you’re encountering.

Stay safe.

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Charlotte Beugge spent more than 20 years as the deputy personal finance editor on The Daily Telegraph and then The Daily Mail. A freelancer since 2010, her work has appeared in national newspapers, magazines and websites.

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