Coronavirus Business Interruption Loan Scheme
There have been amendments to CBILS following SMEs reporting difficulties in accessing much needed support. As at 6 April, the scheme is as follows:
- Loans, overdrafts, invoice finance and asset finance from £50,001 (Amended 1 May ex Chancellor’s letter to the banks re introduction of Bounce Back Loan Scheme) up to £5m and for up to 6 years
- No upfront costs and lower initial repayments as the government covers first 12 months of interest payments and any lender-levied fees
- Government provides lenders with a guarantee of 80% on each loan to encourage lending
- 40 accredited lenders delivering scheme, backed by government owned British Business Bank
How to apply?
- Find a lender Use the British Business Bank’s site to find an accredited lender
- Approach them, firstly through their website
- Lender makes a decision. After SMEs reported difficulties in accessing finance when the scheme was launched 23 March, the following changes have been made:
- current loan scheme extended so that all viable small businesses affected by Covid-19, and not just those unable to secure regular commercial financing, will now be eligible should they need finance
- lenders banned from requesting personal guarantees on loans under £250,000 and making operational changes to speed up lending approvals
- for loans over £250,000 personal guarantees will be limited to 20% of any amount outstanding on the CBILS lending after any recoveries from business assets. Lenders were already prevented from asking business owners to put their homes on the line, but this change provides reassurance regarding other personal assets
- If one lender turns you down, you can apply to another and remeber the scheme has been changed since it was first launched. If you were originally turned down, consider reapplying
Who is eligible?
You can check your eligibility on the British Business Bank’s site. Your business must:
- Be UK-based
- 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)
Most business sectors are included. The exceptions are banks, insurers and reinsurers, public sector bodies, grant funded further education establishments and state funded primary and secondary schools.
What information will lenders need?
Your borrowing proposal will need to include the amount you would like to borrow, for what purpose, and over what period you intend to repay the loan. The lender will be checking that you are able to afford the repayments. Your lender is likely to require the following information. If you are approaching your current lender for a smaller amount, the process may be automated and may not require the same level of infomation. If you need our help in preparing your borrowing proposal, please do get in touch.
- Last two sets of accounts filed (unabbreviated)
- Latest management information (Until end February 2020) including profit & loss and balance sheet
- Aged debtors and creditors as of end February 2020
- Last six months bank statements – business and personal – if you are applying a to bank other than the one you currently bank with
- Details of your personal assets, liabilities, income and expenditure
- Details of any Time to Pay arrangements with HMRC and/or a snapshot of your HMRC status for PAYE, VAT and corporation tax
- What, if any, security is being offered?
- Details of how the amount requested has been calculated and an impact statement of how Covid-19 is affecting your business i.e. is the business closed? What wages need paying? Details of ongoing expenses
- What other options have been explored? E.g. furlough, rate relief, time to pay arrangements etc
- When the pandemic is resolved, how long do you believe it will take you to start recovery? What challenges will you face e.g. future loss of contracts/staff availability
- What changes is the business making in the short to medium term to help drive business performance back to either pre virus levels or beyond?
The British Business Bank has recently added guidance on lenders’ requirements to its website, producing the Better Business Finance lending application checklist. It is very similar to the list above, covering management accounts, cashflow forecast, assets, business plan and historic accounts, together with information about the business owner, their investment in the business, available security and other business interests.
Support for large businesses is avialable through the Coronavirus Large Business Interruption Loan Scheme,which provides a government guarantee of 80% to enable banks to make loans of up to £25 million to firms with an annual turnover of between £45 million and £500 million.
Support for larger businesses is available through the Covid-19 with more information available from the Bank of England.
Reference documents and useful links:
There are three central government guidance documents.
Guidance for employers and businesses on coronairus (Covid-19). This general guidance covers symptoms, social distancing
Covid-19: support for Businesses. The government’s package of measures to support people and businesses through Covid-19.