COVID-19: Coronavirus Business Interruption Loan Scheme (CBILS)
Apr 14, 2020
PAGE UPDATED 14/04/20
A new temporary Coronavirus Business Interruption Loan Scheme (CBILS), delivered by the British Business Bank, is available to support businesses to access bank lending and overdrafts.
Following concerns raised by MPs, banks and small businesses, HMRC updated the conditions for how the CBILS will operate to make it easier to access. Now all viable small businesses affected by COVID-19, and not just those unable to secure regular commercial financing, are eligible for financing to keep operating during this difficult time.
The Government is also stopping lenders from requesting personal guarantees for loans under £250,000, and is making operational changes to speed up lending approvals. A personal guarantee will still be required for loans of more than £250,000 but recoveries are capped at a maximum of 20% of the outstanding balance of the CBILS facility (the portion not guaranteed by the government).
CBILS supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance. The scheme provides the lender with a government-backed guarantee potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’. These are loans, not grants – a business plan which details your ability to repay this will be essential. The borrower always remains 100% liable for the debt.
The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of between £50,000 and £5 million in value.
Businesses can access the first 12 months of that finance interest free, as government will cover the first 12 months of interest payments.
You are eligible for the scheme if:
- your business is UK based, with turnover of no more than £45 million per year
- your business meets the other British Business Bank eligibility criteria
Larger businesses, with an annual turnover of between £45m and £500m, will be eligible for the new Coronavirus Large Business Interruption Loan Scheme (CLBILS). This provides a government guarantee of 80% to enable banks to make loans of up to £25m to qualifying firms.
How to access the scheme
You should talk to your bank or finance provider (not the British Business Bank) as soon as possible and discuss your business plan with them. This will help your finance provider to act quickly once the Scheme has launched. If you have an existing loan with monthly repayments you may want to ask for a repayment holiday to help with cash flow.
CBILS: Key Features
Up to £5m facility: The maximum value of a facility provided under the scheme will be £5m, available on repayment terms of up to six years. The minimum value is £50,000 – if you wish to borrow less than this you should apply for the Bounce Back loan scheme instead.
80% guarantee: The scheme provides the lender with a government-backed, partial guarantee (80%) against the outstanding facility balance, subject to an overall cap per lender. No guarantee fee for SMEs to access the scheme. No fee for smaller businesses. Lenders will pay a fee to access the scheme.
Interest and fees paid by Government for 12 months: The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.
Finance terms: Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.
Security: No personal guarantees may be requested for loans of £250,000 and under. For facilities above £250,000, the lender must establish a lack or absence of security prior to businesses using CBILS. If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
The borrower always remains 100% liable for the debt.
Access to the scheme
Businesses should approach their own provider – typically via the lender’s website. They may also consider approaching other lenders if they are unable to access the finance they need.
Decision-making on whether you are eligible for CBILS is fully delegated to the 40+ accredited CBILS lenders. These lenders range from high-street banks, to challenger banks, asset-based lenders and smaller specialist local lenders.
What types of finance are available and who offers which type?
CBILS supports a wide range of business finance facilities, including:
- Term loans
- Asset finance
- Invoice finance
Additional application notes
Given there is likely to be a big demand for facilities once the scheme goes live, The British Business Bank asks you to please:
- Consider applying via the lender’s website in the first instance. Telephone lines are likely to be busy and branches may have limited capacity to handle enquires due to social distancing
- Consider the urgency of your need – it is possible that some businesses may be looking for regular longer-term finance rather than ‘emergency’ finance, and there may other businesses with a more urgent need to speak with a lender.
A useful summary to compare business loans can be found on the KNOWYOURMONEY web site.
Applications should be made to your usual bank or finance company.
There will be administration and information to collect before you make your loan application, and we can advise you on this. The more complete your application, the more it is likely to be prioritised as it will be easier for your bank manager to approve and tick off their list.
Typically, banks will require three years trading results and a Statement of “Support and Resilience”. Here’s the information which you should consider having ready to supply:
- Account and reference details
- Personal details of all the partners and directors of your business (including home addresses for the last three years)
- Ideally up-to-date asset and liability forms for each of the partners and directors
- Correct business details including company registration number and registered address
- Last three years of filed statutory accounts
- A full schedule of finance and hire purchase commitments (including current balances, repayment commitment details and expiry dates)
- 12 months’ business bank accounts
- Up to date management accounts for the whole year or the last full quarter
- Aged debtor/creditor listings
- Confirmation of existing outstanding debt
- Personal statement showing net worth and incomes/outgoings
It will also help if you provide a clear explanation of the impact of coronavirus on your business, plus details of how you are trying to mitigate that impact, including any cash forecasts to support your long-term viability as a business. Explain what other actions you have taken to address the situation, such as VAT deferral or furlough – banks will expect you to have also taken advantage of all the other government support available. If you set out these details clearly through bullet points on an A4 page, plus add in a 12-month cashflow forecast, this will put you in the best possible position to encourage the bank to lend to you once you get to the front of the queue.
Make sure there aren’t any discrepancies between what you state as your income on your CBILS application and what your bank may be aware that you actually receive each month. Banks need to be responsible lenders, and they will continue to conduct their usual affordability checks.
The loan process typically involves:
- Step 1: You submit an application (typically online);
- Step 2: An account manager reaches out to you to learn more about your business, collect documentation, file credit checks if necessary, and find terms that suit your need.
- Step 3: Underwriters review your application and make a decision. They may contact you or your accountant if they have additional questions.
- Step 4: You accept a loan offer and you’ll be fully funded.
Please do please contact us if you would like any help or advice with applying for a loan. We can provide the necessary information which your lender requires, and this may stand you in better stead to receive CBILS funding. We are here to help you in any way we can.