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Update on the Coronavirus Business Interruption Loan Scheme (CBILS) as of 6 April 2020

The Coronavirus Business Interruption Loan Scheme (CBILS) 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.
The scheme has been extended so that all viable businesses affected by COVID-19 are eligible. The CBLIS is not only for those business unable to secure regular commercial financing but for all businesses affected by COVID-19. This therefore means that accredited lenders have to make available the CBILS to businesses even if they are prepared to offer a facility under normal commercial terms.
There are 40 accredited lenders in the scheme, including all major banks.

Who is 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, were it not for the current pandemic
  • Self-certify that it has been adversely impacted by the coronavirus (COVID-19).

What accredited lenders will need from your business?

Details of the loan:

  • The amount you would like to borrow
  • What the money is for — the lender will check that it is a suitable business purpose and the right type of finance for your needs
  • The period over which you will make the repayments — the lender will assess whether the loan is affordable for you

Supporting Documents:

Businesses will need to provide evidence to show that it can afford to repay the loan. This is likely to include:

  • Management accounts
  • Cash flow forecast
  • Business plan
  • Historic accounts
  • Details of assets

The above requirements will vary from lender to lender. If you do not have everything listed here, a CBILS loan could still be an option to provide finance to support your business.
For many businesses approaching their existing lenders for a smaller facility, the process may be automated and therefore may not require the same level of documentation.
The CBILS cannot be used to facilitate refinancing of existing borrowings, the scheme is designed primarily to ensure the provision of new lending to deal with business interruption caused by the COVID-19.

How can your business access the scheme?

You should apply via your lender’s website or through one of the 40 accredited finance providers offering the scheme. The lender has the authority to decide whether to offer you finance.
Personal guarantees are not required to secure lending below £250,000. For any borrowing above £250,000 personal guarantees will be capped at 20% of the outstanding value of the loan, as the Government is providing the guarantee for the remaining 80% of the finance. This will apply to all customers that have secured a loan under the scheme since its launch on 23rd March.
Given there is likely to be a big demand for facilities, businesses should consider applying via the lender’s website in the first instance. Telephone lines are likely to be busy and branches may have limited capacity to handle enquiries due to social distancing.

The lender makes the decision
The lender has the authority to decide whether to offer your business finance. Under the scheme, lenders will not take personal guarantees of any form for facilities below £250,000.
For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but:

  • they exclude the Principal Private Residence (PPR), and
  • 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

What happens if a lender turns your business down?

If one lender turns your business 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.

We are ourselves issuing regular updates via our website and e-mail cannons. If you are not receiving these and would like to be added to the list please e-mail [email protected] with the subject “Add me to your COVID-19 e-mails”