EIC0865

Written evidence submitted by Rangewell Business Finance

About Rangewell

 

Rangewell are business finance specialists who work with UK SMEs and their advisors to help them find, compare and apply for business finance. 

 

The breadth and depth of Rangewell’s regional, market and sector knowledge give them a unique, real-time insight into the UK SME Business Lending Landscape.

 

        In 2019, Rangewell transacted with 87 different Business Lenders in the UK.

        Since lockdown (March 23rd), Rangwell has received offers or closed transactions with 33 different lenders.

        Rangewell have supported over 450 Coronavirus Business Interruption Loan (CBIL) Applications and Bounce Back Loan Applications

 

Out of 1900 NACFB members, Rangewell are one of the six finalists in the 2020 NACFB Broker Innovation Awards due to their unique combination of machine learning technology, data mapping and human expertise.

 

Summary

 

  1. The CBIL and CLBIL Schemes, when launched, were some of the first and most innovative Government Interventions to support SMEs globally.
  2. The Government’s “Convening Power” has been very effective in encouraging lenders to get the Schemes up and running quickly, effectively and efficiently, as well as ensuring lenders take a pragmatic approach to lending.
  3. For companies that have been able to access the Schemes, the support has been extremely effective and has saved many businesses from significant economic distress.
  4. The lenders who are participating in the Schemes have worked tirelessly and efficiently to implement hugely complex Schemes from scratch within days.
  5. The first wave of lenders who launched their lending offerings concurrently with the details of the various Schemes being finalised, and continuously modified should be commended for the institutional effort that was expended and the pragmatic manner in which they worked alongside the Government to get the Schemes up and running.
  6. It should be noted that, given the resources expended, the complex nature of the Schemes and the generally low interest rates being charged, it is unlikely that the first wave of lenders will “make a profit” from any of the lending that they provide via the Scheme - it appears they were genuinely motivated to support SMEs and the overall UK Economy in the face of unprecedented economic crisis.
  7. For companies that have not been willing or able to access the Schemes, the effects will be disastrous - leading to loss of long-standing pillars of local economies, countless jobs and a reduction in the long-term productivity and competitiveness of the  UK globally.
  8. The majority of companies unable to access the Schemes have been viable but it is because:

 

    1. they were not suitable for debt funding (growth stage, business sector, seasonality, etc.) and both they and the CBIL and CLBIL funders know it would be inappropriate to be making loans that could not reasonably be expected to be serviced or repaid.
    2. They fell through eligibility gaps (loss making, affordability calculations, etc.) - inevitable in any Scheme as complex as those being implemented.
  1. The Government should, as a matter of urgency, provide other support and resources to support such businesses.
  2. We suggest the Treasury Committee request detailed data on how the Schemes have been distributed across Regions and Business Sectors to provide transparency to the Schemes and highlight funding gaps that would otherwise not be visible.

 

How effective is the Coronavirus Corporate Finance Facility, Coronavirus Business Interruption Loan Scheme, and the Coronavirus Larger Business Interruption Loan Scheme?

 

In particular, are these measures succeeding in preventing viable businesses from potentially going under during the Coronavirus lockdown?

 

 

Each week, Rangewell has been monitoring the data release of the Bounce Back, Coronavirus Business Interruption and the Larger Business Interruption Loan Schemes. From the published figures, Rangewell produces weekly Dashboards to help ensure continued scrutiny and understanding of the schemes.

 

This data, married with Rangewell’s unique real-time view of the business lending market, means Rangewell have been able to offer weekly analysis to the media, Chambers of Commerce, Trade Associations and the lenders themselves on the performance of the Coronavirus Business Interruption Loan Schemes.

 

General Themes:

 

CBILS

 

        The overall approval rate for the CBIL Scheme has steadily remained at 50%.

 

        Many CBIL applicants are not suitable for debt funding, and both they and the lenders know it would be inappropriate to be making / taking loans that could not be serviced or repaid.

 

        The average CBIL loan size has been between £194,000 and £275,000 since the commencement of the Scheme. This ties in with what Rangewell are seeing “on the ground” - where most borrowers have been keen to remain below the £250k limit where PGs kick in.

 

 

 

        Low volumes of CBIL applications post-launch suggest that the early unwarranted negative publicity perhaps "scared off" legitimate borrowers from applying to the scheme.

 

Larger CBILS

 

        The Large CBIL Scheme continues to underperform with low application rates and an overall approval rate of just over 30%.

 

        The UK's "Mittelstand" are the real backbone of the economy and need much better support than this.

 

        More is needed to urgently work out why this scheme is not performing and see how it can be improved alongside the equity injection plans that have been floated via the much-anticipated “Project Birch” scheme.

 

Bounce Back Loan Scheme

 

        Although Bounce Back Loan volumes and loan amounts have fallen significantly each week from the peak in the first few weeks, the overall monetary volume of support that has been provided has been extraordinary.

 

        The overall approval rate of 80% suggests a pragmatic and proactive attitude from lenders looking to support smaller SMEs.

 

        The average Bounce Back Loan amount remained at the £30k level. This leads to the assumption that every borrower is applying for the maximum 25% of turnover, and shows the scheme really is helping the smaller end of the SME market.

 

        The statistics show that the Bounce Back Loan Scheme is really supporting and helping a cohort of micro and small SMEs and both the lenders and Treasury should be commended for this - to get a scheme of this magnitude up and running so quickly and pumping over £20bn into supporting SMEs is no small feat.

 

        Rangewell work alongside SMEs every day and the vast majority are hard-working, responsible businesses, providing vital employment and services to their local economies. The headlines being bandied around that half these borrowers have “no intention of paying back the loans” is, frankly, insulting to small businesses who are facing unprecedented situations and levels of stress whilst trying to keep their businesses afloat.

 

 

 

 

 

 

 

 

 

 

How effective has the Government support been so far in terms of coverage and speed?

 

 

When the Chancellor, Rishi Sunak, first announced the CBIL Scheme, both the SME and Business Finance community were overwhelmingly positive.

 

When more details were provided pre-launch and different lenders were asking for different levels of PGs and collateral there was a tendency to become overly negative with many commentators stating that the scheme was not fit for purpose.

 

Rangewell commend the Government for quickly setting standard criteria with regards to Directors Personal Guanrantees for borrowing under £250,000 - the majority of loans under the CBIL Scheme have been in this range.

 

Rangewell would also note that the Government’s “convening power” has been exceptionally effective in

 

  1. Encouraging Lenders to implement the Scheme quickly and effectively.
  2. Ensuring lenders are pragmatic in their approach to lending.

 

It is hard to say how successful the CBIL Scheme has been on a sector or regional basis as neither lenders or Government have been willing to provide such information.

 

We suggest the Treasury Committee request detailed data on how the Schemes have been distributed across Regions and Business Sectors to provide transparency to the Schemes and highlight funding gaps (eg, at-risk sectors like hospitality) that would otherwise not be visible.

 

It is generally agreed that the Bounce Back Loan Scheme has been a huge success.

 

What gaps are there for businesses within the schemes?

 

With a 50% success rate for CBILS there is, by default, a large cohort of over 40,000 companies who have not been supported by the CBIL Scheme - this is the key gap that needs to be addressed.

 

The majority of CBIL applications that have been rejected will be long-standing, credible entities providing employment locally - having failed to receive CBIL funding, many will be facing significant financial difficulties.

 

Many, if not most, of these borrowers will be just as important to their local economies as the nationally-important companies being supported by the forthcoming “Project Birch”.

 

 

 

Rangewell suggest a “Project Spruce” for viable firms that have fallen through the gaps of the CBIL Schemes.

 

In our experience the majority of such rejections are to viable businesses but have been rejected because:

  1. The funds were not for CBIL purposes
  2. The business was loss-making
  3. Affordability criteria was not met - 6 years max length is tough on monthly payments versus the more usual 15 - 20 term that businesses would borrow from High Street Banks over
  4. In excess of 25% of turnover requested

 

It should be noted that in many cases where CBIL criteria was not met, High Street Banks have offered alternative lending to those firms who have been unsuccessful for CBILS.

 

We would highlight that, contrary to common misconception, lenders offering a non-CBIL loan is not the lender "pulling a fast one" but genuinely trying to offer the most suitable support for businesses who do not meet the CBIL criteria.

 

June 2020