BUSINESSES have been warned against the “misconception” that the government’s coronavirus crisis loans will be cheap and will not require security.

Chancellor Rishi Sunak launched the Coronavirus Business Interruption Loans (CBILs) with a pledge that “any good business in financial difficulty” would be able to access them on “attractive terms”.

But many businesses have been turned down or have struggled to get hold of their banks.

Between 800,000 and a million small or medium-sized businesses are unlikely to get the money they need to survive the next four weeks, according to a warning from the accountancy body the Corporate Finance Network.

Tony Williams, chief executive of Wessex Entrepreneurs, said: “The thousands of trained staff that once inhabited the UK bank branch networks are long gone. In past financial emergencies an SME could visit a branch and talk face to face with someone they trusted, not necessarily the bank manager, who could give an instant decision.”

He added: “The old systems that had served the banking industry well for decades were swept away by box ticking and algorithms.”

Dorset Growth Hub and Wessex Entrepreneurs have issued advice for businesses looking for one of the loans.

Mr Williams said: “There is a misconception that CBILs is a government-sponsored rescue scheme that offers cheap lending and removes the need for conventional security. Neither is correct.

“The banks will go through all the usual processes before making an advance. They have shareholders to account to and remember bank profits make a huge contribution to the pensions paid by the UK insurance industry to millions of UK policy holders and pensioners.

“Businesses approaching the Banks for CBIL facilities will need to navigate a system radically changed since previous financial emergencies. Bank branches have closed and those who closely supported SMEs through the bad times are long gone – the bank manager and his/her lending teams. Decisions then were instant and face to face, based on mutual trust.”

The advice from Dorset Growth Hub and Wessex Entrepreneurs includes:

  • Don’t go into bank bashing mode. You will need to build a relationship with your account manager.
  • Be decisive but be careful. Talk to your accountant, lawyer and other professionals.
  • Structure your approach. Ensure you have accurate paperwork, cash flows and supporting information. Make sure it is realistic and honest and in explains how the business was doing before the coronavirus struck. "Low interest rates have helped keep poorly operating businesses afloat for some time, so make sure you are not seen as one of them."
  • Credit assessment: “The banks will be learning from those who want to use CBILS. Expect your lender to be firm, but hopefully fair.”
  • Remember your business may be able to increase its existing overdraft or other facilities without resort to CBILS. Any current borrowing should not be recycled into CBILS.
  • Other lenders: The internet is “awash with seemingly tempting offers to financially challenged businesses”, the organisations say. “Beware. Secondary lenders are always expensive and will not be able to give the support your existing bank can offer.”
  • Mr Williams added: “The Dorset Growth Hub is running regular webinars which we hope will help. Between the Growth Hub and Wessex Entrepreneurs there is considerable knowledge that might help.

“We are regularly hearing the terms ‘when this is all over’ and ‘when things get back to normal’. Normality as we knew is gone. We all need to look to do business in different and innovative ways. The digital economy will help, but people, as ever, will make it happen.”