CBILS exclusions?

While there are no specific exclusions on using CBILS for property finance, whether this be property investment or development, it still requires the borrower to evidence there has been COVID-19 impact.

It is fair to say that there are very few businesses which haven’t been affected by the pandemic in some shape or form. The real issue sits with the lenders and we have discussed this thorny topic with most of them.

The high street banks have generally shied away from utilising CBILS for property finance citing the following:

1. They believe it should only be used for working capital support.
2. It’s not in the spirit of what the scheme was intended for.
3. Lack of trading history (especially for SPV style transactions) which means they are unable to assess the affordability of the loan.

And the list goes on…

As we often see in the debt markets, when the high street banks don’t want to play there are usually a myriad of funders who are more than willing to fill the void. Yes, the interest costs (post interest free period under CBILS) are likely to be much higher, but this reflects the returns required by these funds to satisfy their own investors.

As with many companies who utilise the funding available from the alternative markets, the rationale for doing so is simply to take the business to the next level, or indeed conclude a project, where the subsequent returns far outweigh the cost of funding.

A word of caution though. We are seeing normal LTV parameters being squeezed which is understandable given the uncertainties we all face with this pandemic. Likewise, valuers are also being extremely cautious with numerous instances of anticipated valuations coming in well below expected levels; all lenders are guided by the professional opinion of their appointed valuer. This can create some tension and, in some cases, means the deal can’t proceed.

The alternative funding landscape is expansive and navigating your way through can be daunting. This is the reason for speaking to an advisor who will be able to assess the requirement quickly, identify the most suitable funders in terms of size and structure of requirement, and then present the funding case to ensure best chance of success.

Deadline looming

The 30th November CBILS deadline for registered applications (which need to be drawn by 31st December) is fast approaching so if you are considering whether a CBILS application might work for you then you need to act fast!

If you have any questions about using CBILS for property finance, please feel free to get in touch and l’d be happy to talk you through the options available.

We work with growing UK SMEs and small-cap PLCs that have funding needs in excess of £2m and regularly approaching £100m. Our clients’ needs will typically be for sophisticated finance products such as cash flow based lending or private equity investments. Our value lies in helping clients access funding that relies on confidence in future trading and cash flows. For a confidential, independent, no obligation discussion on the funding options available click the 'Let's chat' button.