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COVID-19 Information Hub

Coronavirus Business Interruption Loan Scheme (CBILS)

In his announcement on Friday 20 March, the Chancellor significantly extended the government-backed loan guarantee scheme revealed in the Budget to address the cash flow issues faced by businesses. The government will now provide loan guarantees up to "an initial" £330 billion for all sizes of businesses – the rules were extended on 3 April to remove some of the obstacles for SMEs. As of 14 April, seven more lenders have been accredited, including Co-op Bank, Starling and Coutts, amongst others.

Please read on for a summary of advised issued by the government and our own supplementary commentary, analysis and guidance.

Updated 14/4/20

Government guidance:

The Coronavirus Business Interruption Loan Scheme supports small and medium-sized businesses, with an annual turnover of up to £45m, to access loans, overdrafts, invoice finance and asset finance of up to £5 million for up to six years.

The scheme will be delivered through commercial lenders, backed by the Government-owned British Business Bank. 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 also make a Business Interruption Payment to cover the first 12 months of interest payment and any lender-levied fees, so businesses will benefit from no upfront costs and lower initial repayments.

In response to feedback received since the scheme’s launch, the Chancellor is taking further action by extending the scheme so that all viable small businesses affected by Covid-19, and not just those unable to secure regular commercial financing, will now be eligible. This change is designed to enable all long-term viable businesses experiencing difficulties as a result of the coronavirus outbreak to access finance.

There are over 45 accredited lenders able to offer the scheme, including all the major banks.

We expect the scheme to run for an initial period of 6 months. There is no limit on the capacity of the scheme.

Eligibility

Your business must:

  1. Be UK-based in its business activity
  2. Have an annual turnover of no more than £45 million
  3. Have a borrowing proposal which the lender: a) would consider viable, were it not for the COVID-19 pandemic OR b) believes will enable you to trade out of any short-term to medium-term difficulty

Businesses from any sector can apply, except the following:

  • Banks and building societies
  • Insurers and reinsurers (but not insurance brokers)
  • Public-sector organisations, including state-funded primary and secondary schools

Facilities supported by the guarantee will be provided by participating commercial lenders. Businesses should check the British Business Bank website to find out which lenders are able to provide the type of finance they are looking for. They should then approach a lender or lenders as they would normally. Individual lending decisions are at the discretion of these accredited lenders, and businesses will remain responsible for repaying any facility that they take out.

Businesses with a turnover above £45m may be entitled to other government support, more information about these schemes is available here.

How to access the scheme

This scheme has been revisited in great detail by the government after public criticism and worries that banks were not giving facilities to enough businesses, or that if there were, this was on unfavourable terms. An extension to a similar scheme was also announced for larger companies – details here.

Importantly, access to the scheme has been opened up to those smaller businesses who would have previously met the requirements for a commercial facility but would not have been eligible for CBILS. Insufficient security is no longer a condition to access the scheme.

It is worth repeating some of the key changes:

Under the scheme, personal guarantees of any form will not be taken for facilities below £250,000.

For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but:

  • recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied;
  • a Principal Private Residence (PPR) cannot be taken as security to support a personal guarantee or as security for a CBILS-backed facility

We’ll be updating this page for the answers as and when they become available, so please, do check back regularly for further information.

The changes will be implemented from 6 April. Banks now have the details required to administer the scheme, and can issue the application forms on request. It is likely that in this challenging economic environment, banks will be supporting their current clients first with the service. Therefore your current provider should be your first point of contact before contacting an alternative lender. If you need assistance identifying a lender, please let us know or visit www.british-business-bank.co.uk and view the detailed pages on the Coronavirus Business Interruption Loan Scheme to find accredited lenders.

A more detailed recap of the main 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.
  • 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 the 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: Under the scheme, personal guarantees of any form will not be taken for facilities below £250,000. For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but:
    • recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied;
    • a Principal Private Residence (PPR) cannot be taken as security to support a personal guarantee or as security for a CBILS-backed facility
  • The borrower always remains 100% liable for the debt. (The point of the scheme is to help banks place funding as fast as possible with the minimum requirements).

And a little more detail on eligibility, to qualify your business must:

  • Be UK based, with a turnover of no more than £45 million per annum
  • Operate within an eligible industrial sector **
  • Your business must generate more than 50% of its turnover from trading activity
  • Your CBILS-backed facility will be used to support primarily trading in the UK
  • Have a borrowing proposal which the lender would consider viable, were it not for the current pandemic
  • Self-certify that it has been adversely impacted by the coronavirus (COVID-19).

As this remains, to all intents and purposes, a standard business loan, the lenders will still undoubtedly wish to see the normal evidence to allow them to make a commercial lending decision and will need to establish that your business remains viable. Remember, this is a loan, not a hand-out and unstructured requests are unlikely to be fruitful.  From recent experience, you should be expected to provide information to include any/all of:

  • A summary of your current business profile, e.g. current operating and contingency plans, works in progress, ability to trade, customer and supplier ability, etc. – half-page, bullet points
  • Latest Management Accounts including Profit and Loss and Balance Sheet, an Aged Debtors and Creditors summary
  • Six month Cashflow including detail of assumptions made
  • Review of request – e.g. Loan CRH 6 Months, £X Overdraft facility, £X Loan
  • Ask each Director / Member / Owner to complete and return a Consent to Credit Form

As ever, please ask us for help if you are considering this.

When you come to formulating a loan application, we can often offer insight as to what might help the lender reach a positive decision, and make the provision of the required information a more straightforward process. Keep in mind that a major part of this process is convincing a decision-maker to lend you money, so a professional and articulate request that addresses the risks presented by the current climate will be helpful. That decision-maker will be going through the same pressures and changing circumstances as you – so whilst all lenders will undoubtedly deal with all requests in a professional and commercial manner, empathetic communications and provision of information in a speedy manner will be invaluable.

If the lender turns you down, you can still approach other lenders within the scheme. Access to the scheme has now been opened up to smaller businesses facing cashflow difficulties who previously would not have been eligible for CBILS because they met the requirements for a standard commercial facility. You may, therefore, consider re-contacting your lender if you have previously been unsuccessful in securing funding.

Do also consider other forms of finance, such as repayment holidays, asset finance, overdrafts – what most businesses need now is help with cashflow, so speak with us about other ways of freeing up cash.

We’ll be updating this page for the answers as and when they become available, so please, do check back regularly for further information.

** The following trades and organisations are not eligible to apply: Banks, Building Societies, Insurers and Reinsurers (but not insurance brokers); The public sector including state-funded primary and secondary schools; Employer, professional, religious or political membership organisation or trade unions.

Fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment.

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