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Coronavirus Business Interruption Loan Scheme FAQs

The Coronavirus Business Interruption Loan Scheme (CBILS) provides financial support to UK businesses that have seen a decrease in revenue and cashflow due to the coronavirus outbreak.
Who’s eligible for the Coronavirus Business Interruption Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme (CLBILS)?
  • The scheme is open to UK based businesses with a revenue of up to £500m;
  • The maximum size of facility that can be included in the scheme is £25m for businesses with turnover of between £45m and £500m. For SME’s with turnover of up to £45m the maximum facility is capped at £5m.
  • Currently the term of any facility cannot exceed 6 years (3 years for overdrafts and invoice finance facilities); and
  • Certain sectors, most notably financial services are wholly excluded, but there are restrictions on other sectors too.
  • The business must self-certify that it has be adversely impacted by the Coronavirus.

Note: The Government also launched the CLBILS for larger businesses. 

An update to the scheme was announced on 3 April. What changed?

The CLBILS was introduced, expanding the governments support of large UK based businesses.

The CBILS has also seen improvements to the scheme’s features and eligibility criteria. These changes mean even more smaller businesses across the UK can access the funding they need.

Importantly, access to the scheme has been opened up to those smaller businesses who would have previously struggled to meet the requirements for a commercial facility. This significantly increases the number of businesses eligible for the scheme and. the expanded scheme will be operational with lenders from Monday 6 April 2020.

Scheme features
  • Personal guarantees of any form cannot be taken under the scheme for facilities below £250k.
  • Personal guarantees may still be required for facilities above £250k, at the lender’s discretion. Recoveries of debt secured by way of a personal guarantee will be 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 (your home) cannot be taken as security to support a personal guarantee or as security for a CBIL backed facility.
What is needed to support an application?

It is important to appreciate that any lending proposals would need to be considered by lenders to be viable were it not for the pandemic.

There are 40 accredited CBILS lenders and all of them would be looking for the following information to support an application:

  • Last 3 years full accounts with detailed profit & loss.
  • Last 12 months business bank statements and in some cases, personal statements
  • Up to date management accounts
  • Aged debtor and creditor lists
  • Last 12 months VAT returns
  • Confirmation of any outstanding debt (provider, term, repayment)
  • Statement of personal assets, liabilities, income and expenditure from all Directors
  • Home addresses of all directors/ shareholders
  • Paragraph on how Covid-19 has affected the business and what the funds will specifically be used for.
  • Cash flow forecasts to support the applications, for up to 12 months.

Please be proactive in gathering this information as soon as possible. Things are changing on a daily basis and lenders are overwhelmed with applications.

How do I access CBILS?

Although the scheme is being administered by the British Business Bank, the recommended point of access will be through your bank, or one of the other accredited lenders. Please note certain banks are only offering access to CBILS if they are an existing customers; they are not accepting new business.

How does the Guarantee work?

Our reading of the position is that it’s very similar to existing schemes like the Enterprise Finance Guarantee Scheme (EFGS). The business is liable for repaying the debt, the bank will only have recourse to the Government if they can’t get satisfaction from the business and any other security provided (personal guarantees for example). Business owners need to tread carefully here.

Differences include: lenders are now being able to offer otherwise wholly unsecured lending facilities up to £250,000 using CBILS. There is no guarantee fee paid by the borrower, the lending restriction under CBILS are much higher and CBILS is opened up to a much wider range of businesses.

In the latest update by the Chancellor, he announced that the government have committed to extending their guarantee on any CBILS loans for up to 10 years, which they hope will give any lenders the ability to allow businesses more time to repay their loans. 

What’s the ‘Interest Free’ part about?

The Government will make a business interruption payment to your business which covers the interest costs for the first 12 months plus any lender levied charges. 

 

What’s the cost of CBILS to my business?

This is a rather tricky one to answer, businesses do not pay directly for access to the scheme, the lenders pay for the access, however it is reasonable to assume that this will be one of the costs that is built in to the pricing of your facility.

Interest costs will be levied by the bank and it is hoped they will be under standard commercial terms. This will be a matter for negotiation. Interest costs will be covered by the government in year 1 but in years 2+, the responsibility for meeting repayments lies with the borrower.

What security is needed for this loan?

For facilities below £250k no security is needed.

For facilities in excess of £250k a personal guarantee maybe required. This personal guarantee will cover 20% of the debt not covered by the government.

Your principle private residence, your home, cannot be taken as security under the scheme.

The bank will likely take a debenture over the assets of the company by way of security.

Do I need evidence that I have a viable business?

Yes. You should show in your borrowing proposal that were it not for the COVID-19 pandemic, your business would be considered viable by the lender. Although the guidance has been eased, the lender must act responsibly and only lend to viable businesses.

How long will CBILS run for?

CBILS was initially available for six months but an application extension deadline was announced until 30 November 2020. 

It’s important to note the deadline for submitting applications was 30 September 2020. If you have not submitted your application by this date, you may not be eligible for a loan. The additional two months grace provides both lenders and borrowers the opportunity to finalise paperwork in a more realistic timeframe.

Are sole traders/freelancers eligible?

Yes, as long as the business activity is operated through a business account. The scheme is open to sole traders, freelancers, body corporates, limited partnerships, limited liability partnerships or other legal entity carry out a business activity in the United Kingdom, with annual turnover of up to £45m, operating in all sectors.

Qualifying businesses must generate more than 50% of its turnover from trading activity.

I am getting other kinds of aid to help respond to COVID-19 – can I still get a loan?

Yes. The eligibility criteria for CBILS does not require lenders to take into account the other forms of government support that SMEs may be benefiting from eg. business rate reliefs or grants unrelated to the CBIL scheme.

It’s important to note the state aid may be restricted for those who join the CBILS. State aid includes Research and Development Tax Credits so should be carefully considered although the limits are high.

What types of finance are available and who offers which type?

CBILS supports a wide range of business finance facilities, including:

  • Term loans
  • Overdrafts
  • Asset finance
  • Invoice finance

Note: Not every lender can provide every type of finance listed and the decision made will be down to the lender.

How long should I wait to make a decision?

To date only 1000 applications have been processed under the CBILS. This is a slow process and the sooner you get going the better.

You should be planning effectively and you should have already identified a pinch point in your cash flow. 

The next step

We can help you identify the extent and duration of your funding requirements and determine the interactions with other announced support (the Coronavirus Job Retention Scheme, and/or Time to Pay arrangements for example).

We can help you raise finance through your current bank and/or alternative lenders, leaving you to continue to run your business during these unprecedented times. We have access to participating CBILS lenders and can make one online application through our online portal. We will liaise with potential lenders and providing you meet the qualifying criteria, arrange funding on your behalf.

If you would like to discuss the support we can provide for your business during this difficult time, please contact your usual UHY adviser or complete the contact form.