Coronavirus Business Interruption Loan Scheme (CBILS)
What is the CBILS?
CBILS is a new scheme that 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 cashflow. CBILS 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 scheme went live on Monday 23 March and will initially run for six months.
What are the key features of CBILS?
CBILS guarantees facilities up to a maximum of £5m available on repayment terms up to six years for term loans and asset finance. For overdrafts and invoice finance facilities, terms will be up to three years. The scheme provides the lender with a government backed partial (80%) guarantee against the outstanding facility balance.
The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees. The borrower will therefore benefit from no upfront costs from the funder and lower initial repayments.
At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under.
For facilities above £250,000, the scheme requires the lender to establish a lack or absence of security prior to businesses using CBILS. Primary Residential Property (PPR) cannot be taken as security under the scheme.
If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
It’s important to note that the borrower will always remain 100% liable for the debt. The CIBLS guarantee is to the lender, not the borrower.
How do I know if I’m eligible to apply?
Smaller businesses (SMEs) from all sectors (except those set out below) can apply for the full amount of the facility, up to a maximum of £5m.
The following trades and organisations are not eligible to apply:
• Banks,
• Building Societies,
• Insurers and Reinsurers (but not insurance brokers);
• The public sector including state funded primary and secondary schools;
• Employer, professional, religious or political membership organisations or trade unions.
To be eligible for a facility under CBILS, your business must:
• Be UK based in its business activity with annual turnover of no more than £45m
• Have a borrowing proposal which, were it not for the COVID-19 pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable your business to trade out of any short-to-medium term difficulty
• If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
How can I access the scheme?
CBILS is available through the British Business Bank’s 40+ accredited lenders, click here for full list. 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.
Decision-making on whether you are eligible for CBILS is fully delegated to the accredited CBILS lenders. These lenders range from high-street banks, to challenger banks, asset-based lenders and smaller specialist local lenders.
Note: if the accredited lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
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.
The scheme is designed to support smaller businesses (SMEs) who don’t meet a lender’s normal lending requirements for a fully commercial loan or other facility, but who are considered viable in the longer-term.
Is the scheme appropriate for Start-ups?
Potentially, if your business activity is primarily UK-based. For early stage businesses in their first two years of trading, the British Business Bank’s Start Up Loans programme (loans £500 to £25,000 at 6% p.a. interest) may be more suitable. Visit www.startuploans.co.uk for more information.
Will I need security to get a CBILS-backed loan?
At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under. For facilities above £250,000, it requires the lender to establish a lack or absence of security prior to businesses using CBILS. NB. Primary Residential Property (PPR) cannot be taken as security under the scheme.
If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
Do I need to evidence that I have a viable business?
Yes. You must show in your borrowing proposal that were it not for the COVID-19 pandemic, your business would be considered viable by the lender, and for which the lender believes the provision of finance will enable your business to trade out of any short-to-medium term difficulty.
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 sectors4. The business 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 e.g. business rate reliefs or grants unrelated to the CBIL scheme.
How We Can Help?
All lenders will have their own application process but common to all will be the requirement to prepare a viable detailed business plan and financial forecast model to support the loan application. Park Capital are experienced in all aspects of fund raising and in particular providing advice and assistance in the preparation of business plans and financial forecast models and should you require assistance in preparing these or in negotiating terms with potential funders Park Capital can assist.
Please get in touch to discuss whether we can help your business.
