David Gordon, principal solicitor at DG Law, suffered serious cash flow issues when COVID-19 struck in March. He explains how Lloyds Bank’s Bounce Back Loan Scheme for businesses has kept his firm afloat during this financially tumultuous time.
Why did you decide to apply for the Bounce Back Loan Scheme (BBLS)?
I suffered cash flow problems caused by an unexpected fall in income and billings (with no time to prepare).
Had you applied for the government’s business interruption loan (CBIL) earlier on?
Yes. I spent a lot of time compiling financial information typical for any loan application. I had to provide further information in relation to personal borrowings and outgoings and had to model three different cashflows, so it was quite a detailed exercise.
Looking at the first cash flow, it was painful to see what the business would have looked like had COVID-19 never happened, as it showed we were on course for a good year.
The second cash flow illustrated the impact of COVID-19 with no bank loan or financial support. That was stark, as it showed we might run out of cash (with an eight-week lockdown) by July. The third cash flow showed the impact of COVID-19 with the benefit of the CBIL, which would allow us to trade for 12 months with a gradual pick up in work.
This took up a huge amount of time and resource at a time of crisis. The only one bright spot was that it forced me to look very critically at our overheads and think carefully about how viable the business might be in the “new normal”. But for the amount we were looking to borrow (£50k), it was disproportionate.
I remember very clearly when I heard about BBLS. I had to stop the car and listen carefully. I’d already lost out on the self-employed grant by a quirk of accountancy, which was disappointing. Then the initial reports on BBLS seemed to link the amount available to the turnover of the business. I was worried that again, due to a good year a couple of years ago, I’d miss out on this. But I was pleased when the bank confirmed that I would be eligible and could switch my application from CBIL to BBLS.
COVID-19 came at a time when we were just climbing out of a trough and a poor 2019 because of all the uncertainty around Brexit. We’d built up some finance debt to help smooth the cashflow from previous years. I usually have at least three months’ cash in the bank (just in case the unthinkable happened), but by March I was running on one-and-a-half months at best.
One of our key clients is in the hospitality industry. At the time of lockdown, they were going through a refinancing of their debt – we were about to sign off and I was about to get paid two to three months’ worth of invoices they had been holding off paying. That finance deal collapsed, with the client owing me fees equivalent to our entire profit for the year. Then on the Friday of that week, the government announced that pubs were to close. My wife had also been diagnosed with breast cancer and was in hospital the day of lockdown having surgery to remove a tumour.
You could say March was a bit tough!
I’m pleased to say that my wife is now on the road to recovery; the client has refinanced their debt through CBIL, and we have been a paid some of the monies owing. Together with BBLS, the pressure is off, and life is a bit more “blue sky” than storm.
That said, it’s not without cost. The loan will have to be repaid. I’m having to make almost half my staff redundant and I’ve given up the lease on my office to keep costs down. Those staff that remain are working part-time until things pick up. If there is a second spike, then the business will be in trouble.
But you have to think optimistically when you run a small business, and I think BBLS gives us the best chance of getting things back on track. I hope a year from now I can look back and say we did the best we could and survived a near apocalyptic situation with compassion and care.
How much did you borrow?
What information do you need to give when applying?
Almost none – just our bank account details for the bank to confirm we were an existing customer.
How did you find the application process? How soon did you get the funding?
Through Lloyds/Bank of Scotland, it was very easy and took about 30 to 40 minutes to complete. It was a tick-box exercise.
There was a bit of navigating the language around state aid and other things like that, as we had received monies by that time through furlough and the local authority rates grant from Southwark LBC.
The money was in our account within 36 hours, which was exceptional. The grant took six weeks.
What will the loan help you do?
In the short term, we can reschedule some debt (PI loans and VAT loan) at a much lower interest rate. It takes the pressure off the business in terms of cost-cutting, so we can wait and see how the economy and our practice recovers.
We may also be able to invest in some technology which increases our efficiency and reduce some of our overheads.