Consultant Zone

CBILS rule breaches under the spotlight

The timing may seem a bit strange, but the focus, as the scheme is about to come to an end, has been redirected to the issue of compliance. We suggest this should have been done earlier in the process.

The early focus of CBILS funders and lenders was the quick processing of loans to assist the Government objective of getting funds to firms who needed governmental support to trade through short to medium term difficulties. This objective was largely achieved as more than £52bn has been lent to 1.2m businesses.

While providers initially gained a large degree of comfort from the Government guarantees, the political and media pressure to ‘get loans done’ has led some to question whether the loans were correctly processed. Now some firms are rightly concerned that they may be unable to successfully claim on those guarantees, if they need to. There are many reasons why the guarantees may not be satisfied. As examples, the loan may have failed to meet the eligibility criteria at the outset, and/or the firm failed to underwrite the loan in line with its own lending policy. In addition, accredited lenders were required to lend responsibly and prospective borrowers had to pass a viability test, which in basic terms meant that a proposal would have been considered viable, had it not been for the business interruption caused as a result of the pandemic. Scheme rules are clear; loans must have been originated correctly in order to qualify for the guarantees provided by the Government.

We have already gained significant experience in relation to CBILS pre and post funding reviews. We have a clearly defined menu of supervision services that enable individual funders and lenders to pick and mix our oversight activities to help them focus on areas that are of specific concern to them.

If you would like to find out more about our list, or if you would like to hear more about how we can help you gain better insights and help manage and mitigate risk, give us a call.