COVID-19 BUSINESS INTERRUPTION LOAN SCHEME (CBILS)

THE HEADLINES​THE ANNOUNCEMENT
At the Budget 2020, the Chancellor announced that a 'Coronavirus Business Interruption Loan Scheme' (CBILS) will temporarily replace the Enterprise Finance Guarantee (EFG), and was launched 23 March 2020.

The Scheme is aimed at supporting Small and Medium sized Enterprises (SMEs ) to access loans, overdrafts, invoice finance and asset finance of up to £5 million (There is a separate scheme for large companies with a facility up to £25 million).

​These loans will be interest free for 12 months and for up to 6 years.

WHAT THE SCHEME OFFERS

• Loans, overdrafts, asset finance and other working capital facilities
• Finance of £1,000 to £5 million
• Loans and asset finance over a term of 3 months to 6 years (3 years for working capital facilities)
• Interest free for 12 months and no fees for 12 months ( some lenders also offering capital holidays for 6 - 12 months)
• No personal guarantees required on facilities below £250,000
• On lending above £250,000 personal guarantees are at the lenders discretion (principle private residences are excluded as a source of security).

ELIGIBILITYKEY FACTS
Each lender will have there own criteria, but to eligible to apply your business must meet the following;

• ​Be UK based business 
• with a turnover less than £45 million per annum; and
• ,Meets the British Business Bank eligibility criteria that businesses: must
  • operate in an eligible industrial sector, a few exceptions apply, which are;
    • Banks and building socities
    • insurers and reinsurers (not brokers0
    • Public-sector orgainsations
    • Employer, professional, religious or political membership organisations
    • Trade unions
  • other may have reduced thresholds (and should seek advice on eligibility);
    • Agricultural and fishing
    • freight transport by road
  • Must generate more than 50% of turnover from trading activity
  • have sound borrowing proposal but unable to meet a lender's normal lending requirements for a fully commercial loan
  • Previously received de minimise state aid does not impact eligibility for CBILS
  • Must have a viable proposal to trade out of difficulty in due course.

Click here for a copy of the British Business Bank Quick Eligibility Checklist for SMEs>

WHENLaunched 23 March 2020 and will be available for 6 months

GOVERNMENT BACKEDGovernment will be providing lenders with a partial guarantee of 80% on each loan to give lenders the confidence to provide finance to SMEs. The guarantee is not for the business, as such the business (and its directors) remain responsible for repaying the finance.

The scheme has been updated so that personal guarantees cannot be requested for lending below £250,000

For facilities above £250,000 lenders may request personal guarantees, whereby the directors are personally liable for repaying the loan if the business is unable to do so. 

​Security (usually by way of a debenture or floating charge) this could be security of business assets or personal assets but the directors primary residential property is excluded.

IMPORTANT - CAUTIONARY NOTE: The business and directors are responsible for repaying the loan. The borrower always remains 100% liable for the debt.
​Directors may need to provide a personal guarantee or security (of company or personal assets, but not Primary Residential Property). 
​If the business cannot repay the loan, the directors may be personally liable. The lenders have a duty to pursue all options to recover the funds before calling on the government backing.


SCHEME UPDATED - The scheme was updated so that personal guarantees are not required for lending under £250,000. Also the scheme is open to businesses who would have previously met the requirements for a commercial loan, but were not eligible for CBILS, and where insufficient security was previously a reason for rejection - we recommend businesses previously rejected on these grounds, re-apply

LENDERSWith over 40 accredited lenders these vary from well known high street banks and specialist asset based lenders to lesser known organisations that offer funding support. Lenders include Barclays, RBS, Metro Bank, Hitachi Capital Business finance and many more. 
​
Click here for a full list of lenders, that can be searched /filtered by type of lending and region >
​
Like any loan application, lenders will require wealth of information, which will vary depending on the type of finance and the terms of the finance offered, but is likely to include;

• Last 2 or 3 years accounts
• Management accounts
• Personal bank statements
• Statements of income and expenditure
• Statements of Assets and Liabilities
• Lending requirement, and more

HOW TO APPLY

1. Each lender will  have their own terms  and lending limits. Approach one or more participating lenders to discuss borrowing terms. These can be your existing lender, or another new lender. 
2. Approach lenders via their own websites, but ensure they are accredited lenders for CBILS
3. The lender has the authority to decide whether to offer you finance, if it can do so on normal commercial terms without utilising the scheme they will
4. If the lender turns you down, you can approach alternative lenders under the scheme.

​REPAYMENT AND FEESOn a plus side, Government are covering interest for the first 12 months making the initial repayments lower for lenders,. In addition, any lender-levied fees will also be paid in the first 1 2 months, so smaller businesses will benefit from no upfront costs

IMPORTANT - CAUTIONARY NOTE: You will however have capital repayments that will start as soon as you have taken the finance, with loan repayments starting as early as 30 days from commencement of the loan.
​
Therefore, remember you will need to factor capital repayments into your cash flow forecasting from the start of the loan repayments and capital plus interest after 12 months. Making sure you can service the loan in an uncertain time will mean you need to consider a number of scenarios for future trade depending on how long the pandemic may last.

WHAT WE KNOW SO FAR - We are aware some lenders are offering capital repayments of 6-12 months, so you may wish to shop around for the best terms for you (all are on individual basis, like any loan)

COMPARISON TO ENTERPRISE FINANCE GUARANTEE SCHEME (EFG)As mentioned the scheme is a temporary replacement of the existing EFG Scheme, or recent blog looks at the differences and added benefits of the CBILS.
Blog - 27/03/2020 - Whats better about the Coronavirus Business Interruption Loan Scheme >


​FREQUENTLY ASKED QUESTIONSWILL I NEED TO GIVE SECURITY?
For facilities under £250,000 security will not be required. For lending over £250,000 security requests are at the discretion of the lender. 
​
For lending over £250,000 generally security will be sort by the lender, this may be against company assets or in the form of a Personal Guarantee.
Lenders cannot seek security over Primary Residential Property (PPR) of a director as security under this scheme
You may wish to  consider independent professional advice in respect of the facility terms and security.

WILL I HAVE TO PROVIDE A PERSONAL GUARANTEE (PG)?
Again requests for Personal Guarantees are at the discretion of the lender for facilities above £250,000. However the scheme has been updated so that no security will be required for lending under £250,000
Lenders cannot seek security over Primary Residential Property (PPR) of a director as security under this scheme
You may wish to  consider independent professional advice in respect of the facility terms and security.

WHAT HAPPENS IF I ALREADY HAVE AN EFG FACILITY?
Any query regarding your existing EFG Scheme should be directed to your current provider and not the British Business Bank.
Refinancing an existing  EFG Facility to a CBILS Facility will be at the discretion of your current provider, and you should contact them directly.
The EFH Scene is now temporarily suspended, with new lending being offered under CBILS

CAN START-UPS APPLY?
Potentially, but for businesses in the first two years of trading, Start up Loans under the British Business Bank Start Up Loans Programme may be more suitable, which offer loans of between £500 to £25,000 at 6% interest per annum.

CAN SOLE TRADERS / FREELANCERS APPLY?
Yes, the scheme is open to enterprises trading in the UK, but there are some conditions. The eligibility detailed above on this page applies and the business activity must be operated through a separate business bank account.

IS THERE A SET UP FEE?
There will be no set up fee for the business, these will be covered by the scheme.

​FURTHER GUIDANCE​See government link https://www.gov.uk/guidance/apply-for-the-coronavirus-business-interruption-loan-scheme

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