Act today Chancellor over CBIL loan scheme before it is too late – Andrew Gray

Businesses can emerge from a range of disasters, but absence of cash is always fatal. Every business owner knows this.

Yet tens of thousands of businesses are needlessly going to the wall because of the inevitable failings of the Coronavirus Business Interruption Loan (CBIL).

Before I tackle CBIL, let me give praise where praise is due. No Chancellor in British history has had to act so quickly and so radically.

This unenviable task has fallen to Richmond MP Rishi Sunak. His declaration that he would do “whatever it takes to support the economy” and that “it was not a time for ideology” calmed the country. When the Prime Minister was somewhat bumbling, Sunak was the steady hand.

Like many business owners, I punched the air as the 39-year old Chancellor reeled off a package of measures for business which read like a Jeremy Corbyn wish-list. Now let’s scrutinise the £330bn CBIL scheme which is in its second iteration (furloughing guidance has had multiple updates).

In simple terms, businesses impacted by the pandemic can apply to one of 40 financial institutions approved by an organisation that few readers will have heard of – The British Business Bank – for loans.

The Government undertakes to the lenders to support 80 per cent of the loan, should the business fail. In year one, the Government pays the interest and the charges.

For loans under £250,000, the directors do not need to give a personal guarantee. On first reading, the scheme sounds promising.

But the latest figures reveal that only around 6,000 loans have been paid from 300,000 enquiries. Only £1.1bn of the £330bn has been lent. With wages to be paid in a few days’ time, thousands of businesses are folding, never to be seen again for lack of cash.

Three weeks ago, I had the misfortune to telephone my business bank. After 102 minutes, with my mobile almost too hot to handle, my call was answered.

The shattered business advisor (from one of the big banks) told me that I could get a call back in two weeks’ time to discuss my issue.

The banks were the wrong vehicle to administer such a gargantuan task.

The first version of the CBIL scheme had to be scrapped because it demanded that businesses could only obtain funding if they first applied for commercial lending – at a time when it takes 102 minutes for the phone to be answered!

In addition, that scheme required business owners to accept personal guarantees. But why would a business owner accept a personal guarantee up to £250k if they didn’t know how long the lockdown would last?

The Chancellor should have realised just how impossible it would be for the banks to provide the lending and to do so at pace and scale. Like everyone else, the banks were not prepared: their staff were ill; their children were at home; their systems weren’t “oven-ready”. Furthermore, since the 2008 global banking crisis, banks have been smothered in red tape.

Although it remains zeitgeist to bash the bankers, why would banks expose themselves to billions in likely bad debt? After all, they are businesses too.

Am I being harsh on our Government? Let’s contrast how our system is working with that of Switzerland. According to Tyle Brule, a Canadian entrepreneur working in Switzerland, he filled out a form with six basic questions, sent it to his bank, and received 10 per cent of the previous year’s turnover within 18 hours.

There is no interest to pay, no penalties, it’s repaid over five years, and tied to a jail sentence for deceitful answers. Businesses will survive in Switzerland, but they will not here.

This is preventable. Using data from Companies House, upon an online submission, the Government could transfer 20 per cet of last year’s turnover to the bank account which pays Corporation Tax or VAT on behalf of a company.

There is no time for due diligence. Just as we can assemble a Nightingale Hospital in my home town of Harrogate at speed, it isn’t too late for the Treasury to implement CBIL Mark 3.

In the next two weeks, the Chancellor turns 40 and my business turns eight.

I wonder how many businesses will have been unnecessarily lost in that time.

Andrew Gray is a former President of the Harrogate and District Law Society. He is director of Truth Legal Solicitors.

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