The Coronavirus Business Interruption Loan Scheme (CBILS) was announced by the Chancellor to help small and medium sized business cope with the impact of COVID-19 on cashflow.
The original support package announced by the Government was revised on 2 April to ensure that more business would be eligible.
The Government will provide lenders with a partial guarantee of 80% on each loan to give lenders confidence in continuing to provide finance to SMEs. The funding is available for businesses in most sectors, except the following:
- Banks and building societies
- Insurers and reinsurers (but not insurance brokers)
- Public-sector organisations, including state-funded primary and secondary schools
- Employer, professional, religious or political membership organisations
- Trade unions
To be eligible your business must:
- Be UK-based in its business activity
- Have an annual turnover of no more than £45 million
- Have a borrowing proposal which the lender
- Would consider viable if not for the COVID-19 pandemic
- Believes will enable you to trade out of any short-term to medium-term difficulty
This last point is important to note. Effectively the scheme is available to those business who would have been able to get funding if it were not for the current pandemic.
You also need to be aware that despite the Government guarantee the business remains liable for 100% of the loan. If something goes wrong and you are unable to repay the loan then the bank will look to recover 100% of the loan from the business, not just 20%.
The revised guidance has confirmed that no personal guarantees will be required for lending under £250,000 and even over this amount the guarantee will be capped at a maximum of 20% of the outstanding balance of the facility after the proceeds of business assets have been applied.
The scheme is being delivered by the British Business Bank and loans will be administered by more than 40 accredited lenders (full list here) but we would advise that you contact your existing bank initially, if they are on the list, as this will likely be the quickest option for you to get the finance you need. In addition, the lending criteria for some banks includes being an existing customer.
The finance available will be from £10,000 up to £5 million in value with the first 12 months being interest free and there will not usually be any fees in this initial 12 month period. The loan must be for business and not personal purposes.
- Overdrafts (up to 3 years)
- Invoice finance (up to 3 years)
- Term loans (up to 6 years)
In the cases that we have seen so far, banks tend to be asking for the following:
- The last 2 years of full accounts
- Latest management accounts (profit and loss account and balance sheet)
- Current debtors and creditors of the business
- A business plan showing that in normal circumstances your business was viable
- A forecast for the business over the next 12 to 18 months, showing the impact of the virus on your income and your intended plans in terms of expenditure, including staff costs. This needs to be realistic and justify the amount you are asking to borrow.
- A statement of personal assets and liabilities where a personal guarantee is likely to be required.
On 2 April the Government announced improvements to the scheme so that it would be more accessible. This included the changes and clarification on the security requirements noted above, as well as allowing businesses to self-certify that they have been impacted by COVID-19, providing more support for smaller businesses so that they can use CBILS rather than their bank's normal lending facilities and automated processes for loans under £30,000.
We can assist you getting this information together and help with forecasts and estimating how much funding you will need.
More information is available from the British Business Bank here.