Remember November 30! Future Fund and Covid loan maturities

Updated on December 03, 2020

5min read

UK businesses have already borrowed nearly £ 40 billion through the government’s coronavirus loan programs. But if your business has not been successful, there is still time to apply, especially since some industries seem to have yet to take their fair share. Article by Nick Green.

The government’s various loan programs to support UK businesses during the pandemic have so far helped businesses to the tune of £ 40 billion or more. Despite the availability problems of some participating banks, businesses across the country received support closely tied to each region’s share of the economy. However, some industry sectors have claimed proportionately much more than others, suggesting that certain types of businesses may lack vital help in overcoming them.

Fortunately, there is still time for businesses that have not yet done so to access government guaranteed loans. Originally slated to close to new applicants at the end of September, the main funding mechanisms have all been extended until November 30. These include the Coronavirus Business Interruption Loan Program (CBILS), Bounce Back Loan Program (BBLS), and the Future Fund (for new businesses that are not yet able to qualify for the CBILS).

How much have UK businesses borrowed under Covid loan programs?

The most recent confirmed figures show some 1.3million loans have been issued to date, totaling £ 38bn – a figure expected to reach at least £ 43bn by early November. The demand for these business continuity loans has been surprisingly consistent across the country, with the distribution of borrowing almost exactly matching the business population in each region.

For example, with CBILS loans, the top five regions in terms of number of businesses are also the top five borrowers, and in almost exactly the same proportion¹:

Region	Total CBILS value (£ m)	Number of loans	Proportion of total loans	Proportion of UK businesses
London	2 809	9,892	18%	19%
South East	2 155	9,026	16%	16%
North West	1,501	5,846	ten%	ten%
East of England	1348	5,796	ten%	ten%
South West	1,169	5 120	9%	ten%

A very similar pattern is seen with the BBLS, the main difference being that this program made many more individual loans (each loan being usually smaller) and lent about three times as much money in total:

Region	Total BBLS Value (£ M)	Number of loans	Proportion of total loans	Proportion of UK businesses
London	8 652	259 655	20%	19%
South East	5,270	175 946	14%	16%
North West	3 980	135,124	11%	ten%
East of England	3,685	121,848	ten%	ten%
West Midlands	3 117	102,322	8%	8%

Another notable difference with Bounce Back loans is that the West Midlands have moved up to fifth position, displacing the South West in terms of the amount borrowed. This may reflect the greater contribution of small businesses in the West Midlands, compared to larger ones in the South West who were able to use CBILS loans.

Which sectors are using Covid loans the most – and which are missing?

Although regions of the UK access government loans almost exactly proportionally, there is an imbalance between different industries. Some sectors borrow much more than their contribution to the economy suggests, while others have borrowed much less. Part of this is because some sectors (like the hospitality industry) have been affected much more by Covid than others – but this explanation does not fit all cases.

Here are the sectors that borrowed significantly more than their “market share”:

Sector	Total loan value (£ m)	Number of loans	Proportion of total loans	Proportion of UK businesses
Wholesaler and Retailer	6,946	196,740	16%	9.3%
Hospitality	3,598	102,464	8%	3.4%
Real estate	2,717	76 955	6%	1.9%

It’s not surprising to see retail at the top of the list, as stores suffered miserably from the foreclosure, especially early on. The reception is also completely in line with our expectations. But the winners here seem to be the real estate companies – which receive three times the typical loan level and now also benefit from a public holiday which stimulates the housing market.

In the meantime, here are the sectors that haven’t borrowed as much as their market share suggests:

Sector	Total loan value (£ m)	Number of loans	Proportion of total loans	Proportion of UK businesses
Professional, scientific and technical activities	3 920	139,996	11%	14.8%
Human health and social work activities	1,537	52,455	4%	6.1%
Arts, entertainment and recreation	811	32 566	3%	4.9%
Education	635	27,593	2%	5.2%

Some of these examples are startling – particularly the arts and entertainment industry, which has been one of the hardest hit by the lockdown. Likewise, it is surprising to see social work and education companies failing to claim loans to which they are clearly eligible, as these sectors have been shown to be particularly vital during the pandemic. Many organizations in these industries may not be aware that business loans are available to them as well.

If your business is facing financial difficulties and you have not yet applied for a loan under CBILS or BBLS, you can still apply for either of these loans, as long as you act before November 30.

Which companies can use the Future Fund?

Some newer companies may find that they are not eligible for CBILS, due to the fact that they are either pre-income or pre-profit, and depend on an equity investment for funding. For these companies, the government created the Future Fund. The latter issues “convertible loans” for an amount between £ 125,000 and £ 5 million, on condition that private investors match the amount borrowed.

A convertible loan is a loan that can then be converted into shares, as an alternative to paying the money back in cash. The idea is that the Future Fund will encourage private investors to keep investing money in new businesses, where they might otherwise have been deterred by the uncertainty of Covid. The use of convertible loans allows these businesses to retain growth capital in exchange for selling off a share of the business – although they retain the option of simply repaying the loan if they wish.

The deadline for applying for the Future Fund has also been extended to November 30. So far 1,243 companies have applied for these convertible loans, of which 745 have been accepted – borrowing a total of over £ 770million. Just under half (42%) of this funding went to companies outside of London. The Future Fund has been invaluable to many startups, especially fintechs, who have raised equity and incurred losses, making themselves ineligible for CBILS loans (while finding Bounce Back loans not large enough for their needs).

Where to Apply for a Last Minute Covid Business Loan

The late indent of CBILS and BBLS loans may disappoint some businesses as lenders tighten their purse strings. Some lenders have previously been accused of ‘selecting clients’ to choose only low-risk companies, fearing that up to 60% of clients will not repay in full and around £ 26bn will end up being lost to profit defaulters or fraudsters. applications. After granting £ 12 billion in Bounce Back loans, HSBC closed its doors to new customers on September 30, while Lloyds Banking Group and NatWest Group limited their loans to existing customers of their banks.

The result is that companies should no longer wait to apply and should err on the side of caution. With the threat of further lockdowns, both regional and perhaps national too, even companies that are currently in good financial health could find themselves in a different position by the end of November. If in doubt, it may be a good idea to opt for one of these plans within the short period of time that they are available. Your best bet is the bank your business is currently using, but if they don’t offer the loans, your accountant or financial advisor may be able to find an alternative.

^{1 All data from British Business Bank}