Three ways SMEs can avoid a coronavirus loan rejection

The Coronavirus Business Interruption Loan Scheme (CBILS) launched almost five months ago. The scheme came under fire for what critics called 'unclear criteria' and 'demanding personal guarantees'. While some of the issues have since been addressed, the application process still poses a challenge for many SMEs.


Thus far, banks have have lent £12.2bn to more than 55,000 small and medium-sized businesses. But as more than 112,000 SMEs have applied in total, this means that 50.4% have been rejected.


No application advice is completely bulletproof. But there are certain steps that you can take to set yourself up for success. Here are our team's tips for any SMEs who are applying.

1. Avoid errors on your CBILS application form

Errors can result in delays in your application, and this can have a huge impact on your business. A delay of a few days, a week, or even a month can be the difference between keeping people employed or not.


There is also a belief that there will be a 'second wave' of applications over the coming weeks. This is, in part, due to companies starting to realise the full extent of the economic impact of COVID19.


As the scheme is due to close in September, it is crucial for SMEs to get their applications in (and get them right!) before the deadline.

2. Predict your business' profitability

CBILS criteria states that lenders should not review a business' predicted future earnings. But that doesn't mean that you shouldn't know the information yourself. It is also suspected that many lenders find it challenging to depart from traditional banking principles.


It's vital to include clear and up-to-date (historical) financial information in your application. But taking the time to produce financial forecasting for your business is also helpful. It could be the difference between an acceptance or a rejection when it comes to your application. It's vital that you feel confident that you have maximised your chances for your business.

While seemingly obvious, a number of firms are failing to incorporate financial statements. We would suggest including:

- Balance sheets

- Future profit and loss estimates based on current cashflow

- Summary of adverse effects of COVID19 on the business

- How the business has been tackling these challenges

- What the expected future challenges are


It's important to demonstrate to lenders that you are on top of your numbers, as well as adapt to different scenarios.

The aim should be to make the lender's job easy for them. Make your business an obvious approval. Anticipate questions that they may have, and be clear about why the business was successful pre-COVID19. Establish a realistic timeframe of how and when the business will be in a stronger financial position.


3. Explain how your SME will operate in the ‘new normal’

Effective scenario planning involves explaining how the business is moving forward. The new rules and restrictions of social distancing have resulted in changes for many firms.

This uncertainty needs to be compounded into scenarios. The more you have planned for, the more you can predict the effects and take mitigating actions.

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