If you are a UK-based SME that is experiencing lost or deferred revenues, leading to disruptions to your cashflow that need funding then the Coronavirus Business Interruption Loan Scheme (CBILS) might address your issues.
CBILS is designed to help if you have a fundamentally sound business that would not have been faced with these issues had it not been for the COVID -19 pandemic.
Check out our blog on alternative sources of funding if you don’t think you qualify for CBILS.
What is CBILS and how does it work? Let’s take a look at:
- Details of the scheme
- Your eligibility
- The information lenders will need from you
- Lender specific requirements and exclusions
- Where to find more information
Details of the Scheme
You must have a borrowing proposal which, were it not for the COVID -19 pandemic, would be considered viable by the lender. The lender must believe that the provision of finance will enable your business to trade out of any short-to-medium term difficulty. In other words, lenders are looking for businesses that were profitable up until COVID -19 hit them.
The borrower always remains 100% liable for the debt.
- Up to £5m facility:
The maximum value of a facility provided under the scheme will be £5m, available on repayment terms of up to six years, the minimum is £25k.
- 80% guarantee:
The scheme provides the lender with a government-backed, partial guarantee (80%) against the outstanding facility balance, subject to an overall cap per lender.
- No guarantee fee for SMEs to access the scheme:
There are no arrangement fees associated with this loan for smaller businesses. Check with the lender, but most are not charging early repayment fees.
- Interest and fees paid by Government for 12 months:
The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees[1], so smaller businesses will benefit from no upfront costs and lower initial repayments.[2]
- Capital repayments:
Capital repayment holidays are being offered by High Street banks for 12 months to their existing customers.
- Finance terms:
Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.
- Security:
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 lender must establish a lack or absence of security prior to businesses using CBILS. If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so. It appears that certain lenders are not requiring Personal Guarantees for this loan, but please check this as it will vary depending on the lender.
- The borrower always remains 100% liable for the debt.
Eligibility
- The loan must be for business purposes
- The business turnover must be below £45m
- The business must generate 50% of its turnover from trading
- The CBILS backed facility must be used to support primarily trading in the UK
- Have a borrowing proposal which, were it not for the current pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty.
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
What information will lenders need?
We have put together a quick checklist of what information you should have to hand to satisfy any lender; this applies to conventional lenders as well.
Information required | Available Yes/No |
Last two sets of accounts filed (unabbreviated) | Yes/No |
Latest management information (Until end February 2020) including profit & loss and balance sheet | Yes/No |
Aged debtors and creditors as of end February 2020 | Yes/No |
Last six months bank statements – business and personal – if you are applying a to bank other than the one you bank with | Yes/No |
Details of your personal assets, liabilities, income and expenditure | Yes/No |
Details of any Time to Pay arrangements with HMRC and/or a snapshot of your HMRC status for PAYE, VAT and corporation tax | Yes/No |
What, if any, security is being offered | None – Personal Guarantee – Other |
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 | Mandatory requirement |
What other options have been explored? E.g. furlough, rate relief, time to pay arrangements etc | Mandatory requirement |
When the pandemic is resolved, how long do they believe it will take them to start recovery? What challenges will they face e.g. future loss of contracts/staff availability. | Mandatory requirement |
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? | Mandatory requirement |
Lender specific requirements and exclusions
- Different lenders are excluding different trades and organisations.
- All expected costs including your personal expenditure may be taken in account.
- Lenders are likely to prioritise existing customers over new customers.
- With any new lender, you will need to complete their KYC (knowing your customer) requirements, which invariably include proof of ID and address, as well as money laundering checks.
- Every lender will have a different application form, but the above checklist of information will ensure that you have the majority of information to hand.
- Debt service cover: Lenders will be concerned by the level that your EBITDA (earnings before interest tax, depreciation and amortization) cover the current commitments of the business. It is not unusual for a lender to look for say cover of 1.75 X current debt commitments – so say your current debt commitments are £100,000 then your EBITDA would need to be at least £175,000 to satisfy the lenders requirements.
Every lender has different debt service level requirements.
Where to find more information
Here is a list of accredited members and partners is here.
For more details of how CBILS works click here.
For more information and advice and sources of business funding contact one of our experts.
Please call us on 0203 327 0567 for a free 15 minute problem-solving chat or email [email protected]
Notes:
[1] Following earlier discussions with the banking industry, some lenders indicated that they would not charge arrangement fees or early repayment charges to SMEs borrowing under the scheme. HM Government greatly appreciates this approach by lenders.
[2] Fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment.