Hindsight 2020 – What The Data Says About UK Government Loan Schemes In The Year Of COVID

As they say, hindsight is 20/20.

Looking back at it all, we were pretty naive in January ’20 as we first heard the news of COVID-19’s arrival on the world stage. Since then, plenty of stuff has happened, not least for the SME finance community given the UK government’s loan schemes: “CBILS” (Coronavirus Business Interruption Loan Scheme) and it’s baby brother, “BBLS” (Bounce Back Loan Scheme).

As a brief reminder, the UK government introduced the CBILS and BBLS to support struggling businesses who’ve been affected by the varying nationwide and local lockdowns in response to COVID.

CBILS are available for businesses whose turnover in their last filed accounts was £200,000 – £45M and who’re looking for funding up to £5M. BBLS are capped at £50,000 and have looser qualifying criteria, being intended by the government to be used up by smaller businesses.

While CBILS launched all the way back in March this year, the government management information begins from 10 May up until 15 November – so take a look at what all the data says about these schemes during the 2020 year of COVID.

Exhibit 1: How Much?

Below is a table summarising the total number of loans, average size, accept rate, etc.:

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So, we can see here that, whilst the average loan size of a BBL is much smaller than a CBILS (almost 10 times smaller!), the BBLS have seen over two times more funding. This all reflects the facts that: (i) there are more small businesses with revenue less than £200k per year, and BBLS have an easier qualification criteria compared to CBILS with a significantly higher accept rate (79% versus 45%).

All that said, it must be noted that BBLS have been – and continue to be – difficult for many business owners to get where they didn’t already have an account with a BBLS accredited lender (as we pointed out in our blog back in August this year).

Mr Bounce Back, a blogger keeping an eye on all things BBLS, noted in September this year about the difficulties SMEs were finding in getting approved…

Exhibit 2: Which Industries Were Supported

We’ve used an index here because the UK government’s data presents it slightly differently – so we’d say here at FundOnion there’s a bit of a ‘new perspective’ being offered.

The point of the index is to show which businesses received CBILS or BBLS funding in proportion to how much that industry represents the UK economy.

Interestingly, for both schemes there are five industries that are over indexed. They are: (1) Real Estate; (2) Accommodation & Food Services; (3) Wholesale & Retail; (4) Manufacturing; and (5) Mining & Energy (plus Admin & Services but only for CBILS).

The first two markets – Real Estate plus Accommodation & Food Service (hotels, restaurants) were immediately hit by the government so it makes sense for them to have a heavy chunk of the government assistance. For the remainder of industries, we might be seeing those who had lower credit risk profiles or plenty of assets on their balance sheet to reduce the likelihood of an unreturned default from a lender perspective.

Exhibit 3: What Regions Were Supported?

Looking at the support provided by CBILS and BBLS accredited lenders across the UK’s regions – it’s not heavily slanted towards major cities such as London. In fact, on both CBIS and BBLS, London itself was under indexed.

From the super “caliente” heatmaps (below) – you can see that for BBLS N. Ireland interestingly was highly over indexed, meaning a high number of facilities were provided compared to the overall number of businesses there. As per the heatmap, the South West of England suffered the most from under funding on BBLS. For CBILS, the East Midlands received the most funding per business but sadly the great nation of Wales was left parched.

Exhibit 4: What Were The Average Loan Sizes By Industry?

Here we’re including these for completeness – however what we can see from this is that the average loan/facility sizes primarily reflects the average turnover of these industries/regions, with businesses borrowing just near the amount they qualified for based on individual pre-COVID turnover.

Exhibit 5: Has The Rate Of Lending Slowed?

Approval for CBILS applications slowed down to around 1,000 – 2,000 per month after the initial rush. You can see from our handy chart below that, since the government announced the extensionit picked up again in terms of demand. BBLS had a more gradual slowdown…

In our analysis of accept rates, we see that during the initial period of May to end of Sept the accept rates and loan sizes remained stable. However, during the second wind of CBILS/BBLS (following the September extension), we see both applications and approvals diverging – indicating the accept rate going down.

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