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What are the Coronavirus Business Interruption Loans?

23 March 2020
Gavin Hooker
COVID-19, Accounting & Compliance, Raising Finance

The Chancellor announced the Coronavirus Business Interruption Loans Scheme (CBILS) in his latest Budget. This scheme opened for applications on 23 March 2020 and can provide facilities of up to £5m for smaller businesses across the UK who are experiencing lost or deferred revenues, leading to disruptions to their cash flow.

The scheme is delivered by the British Business Bank, through accredited lenders and partners. The Coronavirus Business Interruption Loan Scheme will support the continued provision of finance to UK smaller businesses (SMEs) during the COVID-19 outbreak.

In the recent Budget, it was announced that an initial £1.2bn of government-backed lending would be available through the new scheme, however the government has since announced that it will be demand-led.

The scheme has been significantly expanded along with changes to the scheme’s features and eligibility criteria meaning that even more smaller businesses across the UK can access funding. Changes that have been made to this scheme since its launch should be retrospectively applied by lenders for and CBILS facilities it has already offered.

Where any commercial (non-CBILS) facilities have already been offered since 23 March, providing the borrower meets the CBILS eligibility criteria, lenders have been asked to bring these facilities onto CBILS wherever possible and changes retrospectively applied as necessary.

What is available through the Coronavirus Business Interruption Loans Scheme (CBILS)?

The Coronavirus Business Interruption Loan Scheme supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance facilities.

The scheme provides the lender with a government-backed guarantee, potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’.

The features available through this scheme are:

  • 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 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 (where these have not been waived by the lenders), so smaller businesses will benefit from no upfront costs and lower initial repayments – fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment.
  • 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.
  • No personal guarantees for facilities under £250k: Personal guarantees of any form cannot be taken under the scheme for any facilities below £250k.
  • Personal guarantees for facilities above £250k: 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 CBIL backed facility.
  • Principal Private Residence (PPR): A borrower’s/guarantor’s PPR cannot be taken as security to support a Personal Guarantee or as security for a CBIL backed facility.
  • Security: For all facilities, including those over £250,000, CBILS can now support lending to smaller businesses even where a lender considers there to be sufficient security, making more smaller businesses eligible to receive the business interruption payment.
  • The borrower always remains 100% liable for the debt.

Is my business eligible?

Smaller businesses from all sectors, except those listed as not eligible here, can apply for the full amount of the facility.

To be eligible for a facility under CBILS, an SME must:

  • Be UK based in its business activity, with turnover of no more than £45m per year
  • Have a borrowing proposal which, were it not for the current pandemic, would be considered viable by the lender
  • Self-certify that it has been adversely impacted by the Coronavirus (COVID-19).

The British Business Bank has published a quick eligibility checklist for SMEs, which can be found here.

What if my turnover is more than £45m?

The government has announced that large businesses with turnover between £45m and £500m will also receive support from the government in the form of 80% guarantee for loans up to £50m through the Coronavirus Large Business Interruption Loan Scheme (CLBILS).

The facilities will be offered through commercial lenders and will be at commercial rates of interest for businesses that are unable to secure regular commercial funding.

The new scheme launched in April, and more details can be found here.

How do I apply for CBILS?

CBILS is available through 40+ accredited lenders and partners, which are listed on the British Business Bank website.

In the first instance, businesses should approach their own provider – ideally via the lender’s website. They may also consider approaching other lenders if they are unable to access the finance they need. Not every accredited lender can provide every type of finance available under CBILS. The British Business Bank has produced an infographic for SMEs on how this scheme works, this can be found here.

Applications will not be limited to those businesses that have been refused a loan on commercial terms. However, the Treasury has not put a restriction on the interest rates that banks can charge for loans – so be careful!

What information is needed to apply?

Each lender will require different information, but in the main they require the following basic information:

  • Last 3 years’ full accounts with detailed Profit & Loss
  • Last 4 submitted VAT returns (where applicable)
  • Up to date management accounts
  • Aged debtor and creditor lists
  • Confirmation of any outstanding debt (provider, term, repayment)
  • Last 6 months’ bank statements
  • Details of all directors (and >10% shareholders who are not directors) names, addresses, dates of birth
  • Statement of personal assets, liabilities, income and expenditure from all directors (please note the announcement on 2 April that lenders cannot request personal guarantees for loans up to £250k may make this requirement questionable)
  • Paragraph on how the Coronavirus is affecting the business
  • Amount required

If you need help with any loan application then please call us. We are here to support your business, if you have any concerns please call us or email Mark or Andrew.

This information is correct as at 03 April 2020.

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