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CBILS and other possible emergency funding sources
Stuart Mcclellan Fundraising Consultant at TheCCConsultancy Posted 5 years ago
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My own business experience is that the CBILS loan scheme is very hard to access as a small business freelance operator and this NCVO update echoes the "lending officer" reluctance to loan based on "future ability to pay" assumptions. Small turnover efficiently written down on accountant advice , to "no profit" means they will not lend on proveable ability to pay arguments. (moral arguments about tax etc aside)
Small charities have even more difficulty proving future ability to pay , so despite the changes to the rules on turnover etc , they still cannot and probably should not borrow from the banks.
I have never been a fan of "loans to charity" and have concerns for the ever growing "social investment and lending sector" , because most small to medium charity projects are not in anyway in control of guaranteed sustainable core ongoing funding to guarantee repaying debt. However many have gone down that route and raising working and project capital. I suspect in the future many will default which will be another potential charity scandal territory
I have never been a fan of "loans to charity" and have concerns for the ever growing "social investment and lending sector" , because most small to medium charity projects are not in anyway in control of guaranteed sustainable core ongoing funding to guarantee repaying debt. However many have gone down that route and raising working and project capital. I suspect in the future many will default which will be another potential charity scandal territory
For short term emergency funding CBILS might be helpful , but any debt for a charity is in my view dangerous territory .The small business and RHLG grant arena is where i am steering some efforts
For those that didnt know the rules for CIBLS have changed
For those that didnt know the rules for CIBLS have changed
Here below is the latest ncvo update
Coronavirus business interruption loan scheme (CBILS)
Since CBILS was launched, we’ve been urging the government to remove the eligibility requirement that an organisation generate more than 50% of its turnover from trading, as it would prohibit the majority of charities from applying under the scheme.
Last week the government responded by removing the 50% trading requirement, potentially opening the scheme up to thousands more charities.
While a welcome development, feedback from charities that have applied to the scheme is that even if they meet all the eligibility criteria, they have still been refused finance from accredited lenders under the scheme. Even private sector organisations – for which the scheme was designed – have been refused loans by lenders, with take-up to date falling well below the government’s initial expectations.
Another challenge for charities is that their financial models may preclude them from taking on debt finance at such a precarious time. And even if it is possible, not many charities will have an appetite to take on liabilities.
To make the scheme work better for charities, we’ve asked the government to:
- underwrite 100% of loans, as has been done with the bounce back loans scheme for small businesses
- cap interest rates for charities when the initial 12-month interest free period is over
- publish separate guidance for charities on whether loans are a suitable method of finance, and if they are eligible to use the scheme.
Small business grant fund
One of the key changes we’ve been urging government to make is to allow charities to apply for a small business grant of up to £10,000. For organisations unable to take advantage of the other schemes on offer, or the government’s £750m support package, accessing this support is particularly important at a time when a lack of liquidity is their primary concern.
Over the weekend the government responded in part by announcing a £617m discretionary fund for small businesses – including charities – that previously fell outside the scope of the small business grant fund.
The allocation of funding will be at the discretion of local authorities, with priority given to businesses in shared spaces, market traders, and small charity properties that would meet the criteria for small business rates relief.
We’re still waiting for more detail on the scheme to emerge, but it looks like this could provide a much-needed shot in the arm for many smaller organisations struggling during the pandemic. Charities will want to start thinking about applying as soon as possible.
Retail, hospitality and leisure grant fund (RHLG)
Although the retail, hospitality and leisure grant fund benefits certain types of charities, such as charity shops, art galleries theatres, museums, sports clubs and several others, this is a relatively small part of the overall charity sector.
The practical value of the scheme will also be limited because the government considers it to subject to European Union state aid rules which restrict payments to €800,000 (roughly £700,000) per undertaking.
While this may sound like a lot, it will restrict charities reliant on income from a larger retail network, because the scheme may only benefit up to 30 outlets despite them having hundreds of shops in some cases.
To make the scheme work better for charities, we’ve asked the government to:
- reconsider whether the retail, hospitality and leisure grant fund should be regarded as state aid, on the basis that the beneficiaries of the funding are unlikely to distort competition between traders in European Union member states. This would not only benefit charities but would also support struggling high streets
- expand the definition of eligible retail, hospitality and leisure properties to include community buildings that are required to close during the lockdown such as community centres.
Conclusion
The government’s stimulus package to help the UK economy deal with the covid-19 emergency has provided a vital lifeline for many businesses and workers while social distancing measures prevent them from generating an income. However, much of this support was designed with the private sector in mind, meaning charities have been unable to take advantage of the support on offer.
While government is listening by responding positively to some of our calls for reform, significant financial hurdles remain, both now and looking forward to the country’s post-covid-19 recovery effort.
(source info NCVO May 20 2020 )
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