Failed CBILS Loan Application – How The Team At JDC Provided A Solution

With some businesses finding it difficult to access the Coronavirus Business Interruption Loan Scheme (CBILS) with the Bounce Back Loan Scheme (which recently opened for applications) not providing sufficient funding, we thought it would be useful to share our real-life experience of how we have helped a client successfully obtain a CBILS loan after this was initially turned down by their bank.

Our client operates in the leisure sector and has been severely affected by the current measures put in place as a result of the COVID-19 epidemic.  To provide some background details, in recent years the business has been investing significant sums in improving and expanding its operations such that, in the current period prior to lockdown, it was benefiting from this investment with much improved trading results.

In order to assist cash flow, the directors concluded that they required a CBILS loan and made the necessary application with their existing long-term bank.  Unfortunately this was turned down as the bank did not fully understand the investment that the business had been making and based their assessment on the historical reported results.

At this point, our client contacted us for urgent assistance.  Our task was to demonstrate to the bank that the business was clearly viable before the pandemic.  We put together a detailed adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) calculation, identifying costs associated with the investment and savings the company was able to put in place, in order to identify the underlying maintainable ‘pre-Covid’ profits of the business.  We were then able to substantiate this by analysing the results in the six months immediately prior to lockdown and then provide a comparison to the historical results which the bank were using in their viability assessment.

In addition to this, it was clear that the bank did not understand how the directors were remunerated by the business.  We therefore summarised the funds that had been extracted over recent years to explain the ‘normal’ remuneration that was being received.

Our work was detailed in a report to the bank and completed in less than 24 hours of being contacted by our client.

As a result of our work, we are pleased to say the application for the loan was successful and funds approved.  Our client was particularly pleased and relieved with the speed in which we were able to assist, providing the following feedback:

“Many thanks for this and turning it around so efficiently for me”

In addition to assisting businesses to obtain finance, here are just a few of the other ways we have helped our clients in recent weeks:

– Advice on cash flow management;

– Advice on restructuring and turnaround;

– Understanding the conditions and making claims under the Coronavirus Job Retention Scheme;

– Providing financial information and advice in rent negotiations;

– Liaising with HMRC to successfully arrange for the refund of quarterly instalment payments of corporation tax;

– Advice on dividend policy to avoid unlawful dividends;

– Assistance with putting in place time to pay arrangements for corporation tax;

– Applications for accounts filing extensions.

We are currently offering free initial support to help businesses across East Anglia.  Whilst travel and face to face meetings may be difficult, we have a team of experienced professionals willing to help and provide guidance on your loan application or any other matter, if you need it.  Please do not hesitate to contact us.