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Remember 30 November! Future Fund and Covid loan deadlines

Updated 27 October 2020

5min read

Nick Green
Financial Journalist

UK businesses have already borrowed close to £40 billion through the government’s coronavirus loan schemes. But if your business has missed out there is still time to apply – especially as some sectors appear to have not yet taken their fair share. Article by Nick Green.

CBILS BBLS Future Fund

The government’s various loan schemes to support UK enterprises through the pandemic have so far helped out businesses to the tune of £40 billion or more. Despite coming up against availability issues from some participating banks, businesses across the country have received support closely in line with each region’s share of the economy. However, some industry sectors have claimed proportionally much more than others, suggesting that certain types of business could be missing out on vital help to tide them over.

Fortunately there is still time for firms that haven’t done so to access government-backed loans. Originally scheduled to close to new applicants at the end of September, the main funding schemes have all been extended to a fresh deadline of 30 November. These include the Coronavirus Business Interruption Loan Scheme (CBILS), the Bounce Back Loan Scheme (BBLS), and the Future Fund (for newer businesses not yet able to qualify for CBILS).

How much have UK businesses borrowed under the Covid loan schemes?

The most recent confirmed figures reveal that some 1.3 million loans have been issued to date, totalling £38 billion – a figure that is expected to rise to at least £43 billion by early November. The demand for these business continuity loans has been strikingly consistent across the country, with distribution of borrowing almost exactly matching each region’s business population.

For example, with the CBILS loans, the top five regions by number of businesses are also the top five borrowers, and in almost precisely the same proportion1:

Region

Total CBILS value (£m)

Number of loans

Proportion of total loans

Proportion of UK business

London

2,809

9,892

18%

19%

South East

2,155

9,026

16%

16%

North West

1,501

5,846

10%

10%

East of England

1,348

5,796

10%

10%

South West

1,169

5,120

9%

10%

A very similar pattern is seen with the BBLS, with the main difference being that this scheme has made far more individual loans (each loan being typically smaller) and has lent around three times as much money in total:

Region

Total BBLS value (£m)

Number of loans

Proportion of total loans

Proportion of UK business

London

8,652

259,655

20%

19%

South East

5,270

175,946

14%

16%

North West

3,980

135,124

11%

10%

East of England

3,685

121,848

10%

10%

West Midlands

3,117

102,322

8%

8%

Another notable difference with the Bounce Back loans is that the West Midlands has risen to fifth position, displacing the South West in terms of how much it has borrowed. This may reflect the greater contribution of smaller businesses in the West Midlands, compared to larger ones in the South West that were able to use the CBILS loans.

Which sectors are using Covid loans the most – and which are missing out?

Although the UK’s regions are accessing the government loans almost exactly in proportion, there is an imbalance when it comes to the different business sectors. Some sectors are borrowing much more than their contribution to the economy would suggest, while others have borrowed significantly less. This is partly due to the fact that some sectors (such as hospitality) have been much more impacted by Covid than others – but this explanation doesn’t fit all cases.

Here are the sectors that have borrowed significantly more than their ‘market share’:

Sector

Total loan value (£m)

Number of loans

Proportion of total loans

Proportion of UK business

Wholesale and retail

6,946

196,740

16%

9.3%

Hospitality

3,598

102,464

8%

3.4%

Real estate

2,717

76,955

6%

1.9%

It is no surprise to see retail topping the list, as shops suffered dismally from the lockdown, especially early on. Hospitality too is very much as expected. But the winners here appear to be real estate businesses – in receipt of three times the typical level of loans, and now also benefiting from a stamp duty holiday that is boosting the housing market.

Meanwhile, here are the sectors that haven’t borrowed as much as their market share would suggest:

Sector

Total loan value (£m)

Number of loans

Proportion of total loans

Proportion of UK business

Professional, Scientific and Technical Activities

3,920

139,996

11%

14.8%

Human Health and Social Work Activities

1,537

52,455

4%

6.1%

Arts, Entertainment and Recreation

811

32,566

3%

4.9%

Education

635

27,593

2%

5.2%

Some of these examples are surprising – in particular the arts & entertainment industry, which has been one of the most severely hit by the lockdown. Similarly, it is a surprise to see social work and education businesses not claiming loans for which they are clearly eligible, as these have proved especially vital sectors during the pandemic. It may be that many organisations in these sectors are unaware that the business loans are available to them too.

If your business is facing financial difficulties and you haven’t yet applied for a loan under CBILS or BBLS, you can still apply for either of these loans, provided that you act before 30 November.

Which businesses can use the Future Fund?

Some newer businesses may find they are not eligible for CBILS, due to being either pre-revenue or pre-profit, and reliant on equity investment for funding. For these businesses, the government has created the Future Fund. This issues ‘convertible loans’ for between £125,000 and £5 million, provided that private investors match the sum borrowed.

A convertible loan is a loan that can later be turned into equity shares, as an alternative to paying back the money in cash. The idea is that the Future Fund will encourage private equity investors to continue ploughing money into new ventures, where they might otherwise have been deterred by Covid uncertainty. The use of convertible loans allows these businesses to retain growth capital in exchange for giving away a share in the business – although they do retain the option of simply repaying the loan if they wish.

The deadline for applying to the Future Fund has likewise been extended to 30 November. So far, 1,243 companies have applied for these convertible loans, of which 745 have been successful – borrowing a total of over £770 million. Just under half (42%) of this funding has gone to companies outside London. The Future Fund has been invaluable for many startups, particularly fintechs, which have raised equity and made losses, thus rendering themselves ineligible for CBILS loans (while finding Bounce Back loans not large enough for their needs).

Where to apply for a last-minute Covid business loan

The late dash for CBILS and BBLS loans may leave some businesses disappointed, as lenders tighten their purse strings. Already some lenders have been accused of ‘handpicking customers’ to choose only low-risk businesses, amid fears that up to 60% of customers may fail to repay in full, and that around £26 billion may end up lost to defaulters or to fraudulent applications. After making £12 billion worth of Bounce Back loans, HSBC closed its doors to new customers on 30 September, while both Lloyds Banking Group and the NatWest Group have been limiting their loans to existing customers of their banks.

The upshot is, businesses shouldn’t wait any longer before applying, and should err on the side of caution. With the threat of more lockdowns looming, both regional and perhaps national too, even businesses that are currently in good financial shape may find themselves in a different position come the end of November. If in doubt, it may be sensible to go for one of these schemes in the short time that they remain available. Your best option is the bank that your business currently uses, but if it isn’t offering the loans then your accountant or financial adviser may be able to find you an alternative.

1 All data from the British Business Bank

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About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.