90% of the £29bn of lending to UK SMEs in April and May was through headline Government’s emergency schemes, according to Altenburg Advisory.
The debt specialist based its finding on data pooled from the Bank of England, the British Business Bank (administrators of the Covid-19 loans).
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It added, data from UK Finance suggested banks are currently dealing with 14 times their usual number of business loan/overdraft applications, which indicates mainstream lenders are currently having to focus on providing emergency lending.
In a press release, the backers of specialist lenders warned that despite the other attractions of the Coronavirus Business Interruption Loan Scheme (CBILS), it can impose restrictions on how borrowers can use the funds.
Altenburg Advisory, a London-based private company incorporated in January 2019, said growth businesses looking to retain flexibility over how they expand and finance themselves may want to alternative lenders who can lend with much fewer restrictions on how loans can be used, allowing a business to more easily pursue M&A and take on additional debt to fund growth.
It said, CBILS funding cannot be used by those looking to fund management buy-ins (MBIs), for example, and the majority of CBILS lenders will require their debt to rank ahead of any other existing debt. This can be problematic where an existing lender does not want to allow another lender to take a first charge.
Altenburg added, there is also no certainty that a CBILS lender will be willing or able to provide additional finance to help the borrower fund additional investment and growth without a government guarantee.
This compares to facilities that can be arranged with alternative lenders that provide hard and/or soft commitments to provide future funding when required, it said.
Dan Barrett, managing director at Altenburg Advisory, recognised there was much to applaud about the Covid-19 scheme, but added: “Businesses whose plans for the next few years are aimed at growth rather than just survival, alternative lenders can provide a more flexible and appropriate solution.”
