"Given that to date we have not called on the government guarantee, but have been paying a considerable premium for it, this has been a win-win for all."
SME lender Fiduciam has announced that over 75% of the CBILS loans provided during Covid-19 have now been fully repaid and no defaults have occurred.
The British Business Bank’s Coronavirus Business Interruption Loan Scheme (CBILS) was designed to support the continued provision of finance to SMEs across the United Kingdom during the Covid-19 pandemic. The scheme enabled lenders to provide facilities of up to £5m to smaller businesses who were experiencing lost or deferred revenues, leading to disruptions to their cashflow. Over the duration of the scheme, 109,877 loan facilities were approved for a total £26.39 billion.
Fiduciam was accredited for CBILS by the British Business Bank in July 2020. The first Fiduciam CBILS facility was drawn just one month later in August 2020. As Fiduciam increased its CBILS lending, its allocation was increased to £175 million. Funds were advanced to businesses throughout the UK and across a broad range of sectors, including housebuilders, hotels, restaurants, wedding venues, nurseries, specialist engineering companies and office and retail space operators.
Fiduciam has now reached a landmark with 75% of its CBILS loans successfully redeemed, equating to £126 million. Fiduciam says this speaks to the strength of SMEs and their ability to resume generating strong operating cash flows as soon as the worst of the pandemic was over.
Fiduciam’s remaining CBILS loan book is performing well and borrowers have been punctual with interest payments. Only a limited number of CBILS borrowers have requested a loan extension, as their fortunes did not recover as fast as expected. Fiduciam has not had to call on the government guarantee for any loan. Given the strong performance of the CBILS portfolio, Fiduciam expects to remain a net payer to the government in respect of the scheme. To date, Fiduciam has paid the taxpayer a total of £608,000 in fees for the benefit of the government CBILS guarantee.
Johan Groothaert, CEO at Fiduciam, commented: “It is easy to forget what horrible state the economy was in during the first twelve months of the pandemic. Many of the SMEs that approached us found themselves in serious financial and operational difficulties. Our accreditation by the British Business Bank for CBILS allowed us to help them get through this very challenging trading environment. Without CBILS many of those SMEs would not have survived the pandemic, as the liquidity generating efforts by the central banks were taking too much time to trickle down. It was hugely rewarding to assist a variety of great businesses, suffering short-term cashflow difficulties, and enable them to support future growth and employment. CBILS made it possible for lenders like Fiduciam to keep lending, as the government effectively underwrote the “catastrophe risk” through the CBILS guarantee, and hence kept the SME sector afloat.
"With 75% of Fiduciam CBILS loans now successfully redeemed, and the continued performance of the outstanding facilities, our team can take tremendous satisfaction from the high-quality underwriting delivered throughout the pandemic. Given that to date we have not called on the government guarantee, but have been paying a considerable premium for it, this has been a win-win for all. So far, our dataset shows the absence of adverse selection. This observation underscores that well managed government guarantees in times of extreme crisis can be a very efficient tool for protecting the economy.”
