Coronavirus Business Interruption Loan Scheme
The Coronavirus Business Interruption Loan Scheme (CBILS) is a new temporary scheme, announced by the Chancellor, that can provide facilities of up to £5m for up to 6 years for small or medium sized businesses (with an annual turnover of £45m or less) across the UK who are losing revenue and seeing their cashflow disrupted, as a result of the COVID-19 outbreak.
The Government will cover the first 12 months of payments interest free (through a Business Interruption payment), however the borrower always remains 100% liable for the debt. We would therefore advise clients to weigh up this option very carefully to ensure that they can meet future loan repayments, whilst also continuing to meet other known obligations.
The British Business Bank operates CBILS via its accredited lenders. There are over 40 of these lenders currently working to provide finance.
A lender can provide up to £5m in the form of:
Term loans, overdrafts, invoice finance and asset finance.
Smaller businesses can apply for the scheme through the guidance and rules set out on the British Business Bank website at the link below.
The scheme provides the lender with a Government backed guarantee of 80% of the loan. The Government will not charge businesses or lenders for this guarantee.
Applications for a CBILS loan must be made on or before 30th September 2020. Lenders have until 30th November 2020 to make a decision on applications. The Government has since announced that applications for a CBILS loan will be open until 31st March 2021.
Coronavirus Large Business Interruption Loan Scheme (CLBILS)
This second business interruption loan scheme, CLBILS, was announced on 3 April and will provide a government guarantee of 80% to enable banks to make loans of up to £25m to firms with annual turnover of between £45m and £500m. This is fundamentally the same scheme as the initial CBILS but for larger businesses.
Information a Lender will Require
In applying for a normal commercial loan, CBILS or CLBILS, a business will require to be able to demonstrate viability most likely through the provision of the following information to lenders:
Last 3 months bank statements,
Most recent management accounts (if available)
Most recent financial statements
Cashflows showing a return to viability in the next 12-18 months
A statement of how COVID-19 has affected the business and how you expect to be able to bring the business back
Security
Insufficient security is no longer a condition to access the scheme. Businesses will be able to access the scheme, without being offered commercial loans from lenders as their first option.
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.
If you have already received a loan of up to £50,000 under CBILS or CLBILS, you can transfer it to the Bounce Back Loan Scheme (BBLS). You have until 4th November 2020 to arrange this with your lender.
The Government announced that applications for a CLBILS loan will be open until 31st March 2021.
