The financial company – Rangewell – has concerns over the CBILS, which was launched by the British Business Bank on Monday (23 March), which many hospitality bosses may take advantage of during the current pandemic.
Rangewell has, however, compiled a list of companies that may be able to lend money to small to medium-sized businesses to get them through the Covid-19 crisis in place of the Government funding.
Josh Mendez, one of the firm’s hospitality finance experts, explained: “CBILS is based on the EFG (Enterprise Finance Guarantee) loan programme we saw during the financial crisis a decade ago. I know from my time working for a bank during the last crisis that there were many failings in how EFG worked and it seems to me that CBILS has exactly the same shortcomings.
“One of the more worrying things about CBILS is that if a bank were to claim any recompense from the Government, they will have to make every effort to reclaim the money from the business, and this may include pushing the firm into liquidation or seeking bankruptcy orders against directors.
“Rangewell is calling on the Government to give more clarity on this immediately. Hospitality business owners are already facing unprecedented levels of stress and anxiety as they fight to save their businesses, without having to worry about being made bankrupt at some point in the future.
“History shows that, with all schemes like this, the devil is in the detail and we should beware of unintended consequences. The Government needs to ensure that otherwise healthy businesses unable to offer security, or those in historically ‘difficult to borrow’ sectors, don’t get passed over as lenders deal with an unprecedented level of borrower enquiries.”
The number cruncher also stated operators wishing to take up the CBILS loan must consider that the borrower always remains 100% liable for the debt and that, although the scheme allows lenders to make unsecured offers up to a maximum of £250,000, it expects many lenders to seek personal guarantees and/or security, if available.
Rangewell also claimed when it comes to which operators would be accepted in terms of being lent money, the rule of thumb so far has been a case of “would we have lent to this customer last year?”