As COVID-19 forced the UK into lockdown, the Welsh government turned to the Development Bank of Wales to deliver loans to struggling businesses. Marc Mullen speaks to CFO David Staziker about saving jobs and livelihoods in the devolved nation.

A week into the UK COVID-19 lockdown, the Welsh government and the Development Bank of Wales launched a £100m loan scheme to support businesses affected by the global pandemic. By the second week of April it was fully subscribed.

The COVID-19 Wales Business Loan Scheme, which was part of the Welsh government’s £500m Economic Resilience Fund, came just a week after the measures announced by the UK government – including the Coronavirus Business Interruption Loan Scheme (CBILS). Welsh businesses could access CBILS or the Bounce Back Loan Scheme (BBLS), introduced subsequently, as well as the scheme from the Development Bank, which offered loans of £5,000 to £250,000.

“We filled the gap while the banks were getting to grips with CBILS delivery and Welsh businesses were crying out for funding,” says David Staziker, CFO of the Development Bank of Wales. “We had to change the way we worked in order to deliver the scheme.” 

Fortunately, the organisation was already part way through a two-year digitalisation programme: “Of our 230 staff, around a third were reallocated from their usual job to a pod system to process applications. Rolling out Microsoft Teams enabled people to work from home and deliver the scheme with minimal impact on our operations.”

There were seven pods, with 70 staff allocated to them. The process included taking in application forms and checking eligibility, doing searches and customer due diligence, researching the investment proposal, sanctioning each loan, checking the legal documentation and, finally, the payment itself.

Staziker recounts how the Development Bank worked with the Welsh government to come up with a “very clear product” (see ‘The Terms’, page 9): “Of all the applications we had, about 90% were new businesses to us.” Staziker says this differed markedly from CBILs and BBLS, because the banks administered those programmes and in many cases lent to existing customers. He adds that the Development Bank, which is a member of the Corporate Finance Faculty, was able to deliver because it is a lean organisation that was able to alter its normal procedures quickly, allowing it to deliver more money to more businesses as quickly as possible. 

The first loans were agreed on 2 April, just three days after the scheme was announced, and the first funds reached applicants the next day. The Development Bank previously invested in around 400 businesses a year, but in the first week of the scheme alone, approximately 1,500 applications were received. As at 17 June about £90m has been approved and £80m drawn down, with the average size of loans at almost £60,000. Perhaps most crucially, the number of jobs safeguarded is estimated at nearly 12,000.

The Development Bank’s scheme got up to speed before the UK-wide schemes announced by Westminster could, as those covered far more applicants and were being delivered by multiple organisations. However, CBILS and BBLS are working pretty well now, Staziker says: “One of the challenges is on larger deals, where we take debenture security. Getting deed priorities agreed is taking time because the banks have been overwhelmed with the volume of applications going through them, and we need their input.”

In addition to support from the UK government, the Welsh government offered grant support via its Economic Resilience Fund, which received almost 9,000 requests. Due to the scale of demand, it was put on pause in order to give them an opportunity to consider what further support businesses, charities and social enterprises need.

Staziker explains: “For our loan scheme there was an initial surge of businesses that were panicking. Some needed cash and some just wanted a comfort blanket. This has allowed them to stay in business. As we start to open up, they’ll be looking at the working capital requirements of businesses, and that will be something particularly the government and the banks will have to work with. Leisure, retail, tourism and construction will be the areas likely to be in need of help.” 

Support for manufacturing

South Wales Metal Finishing (SWMF) is a long-established family-owned business, based in the former mining town of Treorchy in the Rhondda Valley, South Wales. The business provides a range of finishing services including zinc plating, anodising and polishing to the engineering, automotive, medical, aircraft and metal pressing industries. It applied for a £100,000 loan to help safeguard 14 jobs in the local community.

SWMF director Julia Demaid said: “We now have every chance of weathering the storm of COVID-19. We are so grateful for the support and the turnaround time from applying for the loan. It has enabled us to look after our staff at this incredibly difficult time.”

About the article

Read the full article in the Corporate Financier July/August 2020 edition. Access this magazine as well as our extensive archive brought to you by the ICAEW Corporate Finance Faculty.