The conveyancing sector has been severely impacted by the government imposed lockdown and property market freeze at the end of March.
Anecdotally, many firms have taken advantage of the government’s Job Retention Scheme by furloughing their staff with some businesses placing up to three quarters of their fee earners on furlough.
Whilst this will help save money in these times of need, the salary savings may not be enough to cover the losses many firms are making until restrictions are lifted and the property market can begin moving once again. Even post-lockdown activity is set to be affected with a predicted 38 per cent fall in the number of transactions this year.
To support businesses, the government introduced a number of Coronavirus Business Interruption Loan Schemes (CBILS) in a bid to protect businesses by ensuring losses are covered until the economy is able to recover.
However, many law firms are struggling to access these loans with some claiming continued delays and uncertainty could lead to firms closing permanently.
Sue Carter, UK Head of Professional Services Sector at Clydesdale Bank, Yorkshire Bank and Virgin Money has taken the time to offer her unique insight into the government backed loans and the practical steps firms should be doing to ensure they are able to secure finance at this time.
What loans are available?
Our customers tell us our sector experts add real value to their business. We continue to offer practical advice and assistance and are offering a range of options to support customers through these challenging times, including support from the UK Government’s Coronavirus Business Interruption Loan Scheme (CBILs). Whilst our immediate focus has to be supporting and advising our existing customers, we have remained engaged with others we know but who are not our customers by sharing intel on how firms are coping in these ever evolving times.
For those that are not customers, and are wanting assistance under CBILS, we are recommending they speak to their existing bank in the first instance to see how they can support them.
We hear lots of businesses are being rejected for loans? What are the big things the banks are looking for on their applications?
The proposed borrower must evidence that they have a ‘viable business’ ie they must show in their borrowing proposal that were it not for the current pandemic, we would not have identified the customer as being in or approaching financial difficulty, or another high-risk groups.
What are the top issues to avoid? Don’t avoid converting WIP and Debtors to cash at the earliest opportunity and don’t underestimate how quickly you can run out of cash. Don’t ask your bank to lend what you think they will lend you, ask for what you actually need. It doesn’t look good if they agree to advance funds to you, and then soon after you realise that wasn’t enough and have to re-approach them for more funds. It would call into question your original forecasting.
What are the alternatives?
Our business experts can support with a package of options to reduce the impact of coronavirus on their business, including the UK Government’s Coronavirus Business Interruption Loan Scheme (CBILS), overdraft and loan facility increases/extensions and capital repayment holidays for loans &/or asset finance agreements.
How do you see the legal sector will look after this?
The enforced lockdown has seen firms adapt to new ways of working and to how legal services are delivered. I can see some of these becoming the ‘new-normal’ in due course to create further efficiencies for firms and their clients. I personally think the sector will bounce back quite quickly but business as usual will not look the same as it did pre-lockdown. It will be better.
