Business loans in lockdown and beyond

Financial support for small businesses continues to unfold through the government schemes – most notably CBILS and BBLS. At the same time, the commercial lending landscape is evolving. This overview, part of an in-depth report published on, includes original research into consumer spending intentions, as well as expert predictions from Katrin Herrling, CEO of Funding Xchange and Mike Cherry, national chairman of the Federation of Small Businesses. To download and read the report in full, click here.

Summary: CBILS Lending

The Coronavirus Business Interruption Loan Scheme (CBILS) was the first business loans programme to be unveiled by the government as a result of the shutdown, inviting applications from 23 March onwards.

Businesses that are losing revenue or seeing their cashflow disrupted as a result of the COVID-19 outbreak can apply for finance worth between £50,000 and £5 million through an approved lender, although in some cases the minimum amount can be lower.

The British Business Bank (BBB) has now authorised more than 100 lenders – including high-street banks, challenger banks and regional and specialist lenders – to provide CBILS finance in the form of loans, overdrafts, invoice finance and asset finance. The scheme is open to SMEs with a turnover of up to £45 million, and personal guarantees, where business owners use their own assets as security for their loan, are not typically required for amounts up to £250,000.

Government data released in mid-June 2020 shows CBILS lending has topped £1.2 billion, with over 56,000 loans approved and the average amount lent over £200,000. The rate of application approval increased from just 21% in mid-April, to around 50%  in the past month . The graph below shows how the rate of CBILS lending has progressed since the scheme was introduced.

Summary: Bounce Back Lending

After CBILS was underway, the Bounce Back Loan Scheme (BBLS) launched, aiming to give smaller businesses a route to emergency cash with a typical turnaround of a few days. The scheme, which started on 4 May, was designed to offer “quick and easy-to-access loans” ranging from £2,000 to £50,000, up to a maximum of 25% of a company’s turnover. These loans, lasting 6 years, are 100% guaranteed by the UK government, which also pays the first year’s interest. The business then pays interest at a flat rate of 2.5% a year.

As of July 21st, there are over 20 approved BBLS lenders, and the scheme has lent £32.8. billion so far. This is almost three times more than the figure for CBILS, although some applications from smaller firms were shifted from CBILS to BBLS when it started.

BBLS has seen strong demand, with more than 1.1m small businesses borrowing an average of over £30,000. Approval rates are also far higher under this scheme – currently running at over 80%. However, the popularity of BBLS, along with CBILS, means the schemes have not been without controversy. Some applicants have complained about delays, unexpected soft credit checks or being rejected by lenders despite believing that they met the criteria.

Impact: Business Loans Landscape

The first three months after lockdown saw SMEs borrow £36.4 billion through CBILS and BBLS. This compares to £56.7 billion in loans issued by the UK’s banks to SMEs during the whole of 2019 – a figure which was down 1.7% from the year before, according to Bank of England statistics. At a time when the tap has been all but turned off for more traditional types of business loan, CBILS and BBLS have been a crucial stream of funding, and they have largely replaced the business loans sector – for the time being at least.

“The availability of low-cost, unsecured funds to small businesses was a needed lifeline, and it makes sense that traditional lending products have currently taken a sideline while these products are available,” says Sharif Mohamed, head of business development – partnerships at iwoca, an approved CBILS lender.

“It’s the first time, especially for smaller businesses, that larger unsecured amounts have been readily available at low rates, and the take-up speaks to more than just necessity; it indicates an existing demand for this funding.”

Katrin Herrling, CEO and co-founder of business loans marketplace Funding Xchange, agrees that “the business loans landscape has been at least temporarily transformed” by the coronavirus pandemic and the subsequent introduction of new government-backed finance schemes. But she believes the appetite for commercial loans of all sizes “has remained largely intact”, although the profile of applicants who have successfully secured funding from CBILS-accredited lenders over the past three months has been skewed towards higher quality and more mature businesses.

“Despite the success of the BBLS in providing emergency funding, Funding Xchange data shows that applications for sub-£50,000 funding have not fallen significantly since the launch of the programme, which suggests continued unmet demand,” she adds.

However, Herrling also points to another trend: “We are seeing businesses that have shown strong commercial performance during the crisis finding it difficult to access funding. As most schemes are focused on supporting businesses that have been negatively impacted, those performing well don’t qualify, and few lenders have provided fresh funding outside the schemes. The good news is that lenders are returning to market and developing solutions to support businesses with strong prospects.”

CBILS and BBLS figures correct as of July 21st, 2020.