The Coronavirus Business Interruption Loan Scheme
I hope you are all surviving in these unprecedented times and also keeping safe? The Coronavirus Business Interruption Loan Scheme (CBILS) has now been live and available to business owners for a just over a week.
In conversations with numerous business owners over the past few days, it seems that there continues to be some confusion and uncertainty around how the scheme works and what the qualifying criteria are.
As a result, I thought it would be useful to provide some further guidance.
As you might imagine, lenders of all types are seeing unprecedented numbers of enquiries from both new and existing clients, which in itself causes a problem as the banks try to deal with the sheer volume of requests.
All of that said here is the latest on CBILS.
The Key Points
The British Business Bank operates CBILS through its accredited lenders. There are over 40 of these lenders currently working to provide finance and include:
- high-street banks
- challenger banks
- asset-based lenders
- smaller specialist lenders
Through the scheme, a lender can provide up to £5 million in the form of:
- term loans
- invoice finance
- asset finance
In effect what CBILS does is give the lender a government-backed guarantee for the loan repayments, the idea being that it will encourage more lending.
However, it is important to realise that this is not ‘free’ money and it is important to realise that the borrower will have full liability for the amount of the loan or debt they take out.
The maximum value of any facility provided under the scheme is £5 million. For term loans and asset finance the maximum loan term is up to six years. For overdrafts and invoice finance it is up to three years.
As a result, affordability comes ‘in to play’ and any lender you approach will apply their normal lending criteria to ensure you can afford to repay the loan over the agreed term. It is also worth pointing out that if a lender can offer the finance on their normal commercial terms without making use of the CBILS scheme, then they will do so.
The Government has agreed to make a Business Interruption Payment to cover the first 12 months of interest payments and also any fees that are levied by the lender.
The lender can choose to use the scheme for unsecured lending for facilities of £250,000 and under.
The ‘Big Four’ banks have agreed that they will not take personal guarantees as security for lending below £250,000.
However, for facilities above £250,000, the lender must establish that the borrower is unable to provide security, before it uses CBILS. Please note that a business owners primary residential property cannot be taken as security under CBILS.
To find out more please visit the British Business Bank website here:
Applying For a Loan
As I have already mentioned CBILS is not a route to ‘free’ money and all the accredited lenders in the scheme will apply their normal lending criteria in ascertaining if they can assist.
They will also need some basic information about you and your business in exactly the same way they would if you were applying for a normal loan or facility.
So as a minimum, lenders are likely to require some or all of the following information:
- 3 years financial accounts and latest management information where this is available.
- Confirmation that the businesses 2019 trading performance demonstrates affordability of their existing debt as well as any new debt they are taking on.
- Up to date cash flow forecasts. (What do they show and are they realistic?)
- 6 months business bank statements.
- 6 months personal bank statements.
- Fully completed personal asset/liability/income/expenditure form.
- What, if any, security is being offered by the client?
- Details of how the loan required has been arrived at including a COVID-19 impact statement. This can include such details as: is the business currently closed, wages to pay, ongoing expenses etc.
- Details of other options that have been explored such as: furlough, rates relief, HMRC ‘time to pay’ arrangement.
- When the pandemic is resolved, how long does the business believe it will take for them to start recovery and what likely challenges will they face.
Given that everything is moving so quickly, things are changing on a daily basis but this is the latest from the British Business Bank.
For more information please follow the link above or click HERE for CBILS FAQ.
Funding Track continues to offer support to existing and new customers. If we can assist in any way don’t hesitate to get in touch.