Wednesday, 29 April 2020 15:07

How to access the Coronavirus Business Interruption Loan Scheme Featured

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The Government’s announcement of measures to support businesses affected by the Coronavirus (23 March) was welcome news. The introduction of the Coronavirus Business Interruption Scheme (CBILS) is designed to help sole traders and Small and Medium Enterprises (SMEs) access finance of up to £5 million.

Unsurprisingly, lenders are receiving a huge wave of applications but the slow process is causing great concern, with only 2% of businesses having been able to access funds from the CBILS so far.

That’s why last night (27 April), the Government unveiled its plans to offer 100% guarantees on ‘Bounce Back Loans’ of up to £50,000 for the smallest businesses affected by the Coronavirus outbreak. Introduced to quicken the process of gaining financial support, the loans will be available from next week - we’ll cover how to access this new micro loan in our next blog.

So, how do you go about applying for the CBILS and what do you need to do to make sure your application has the best chance of success? We look at some key points to consider.

Can your business apply for the scheme?

Firstly, to be considered for the scheme, you need to prove you have a ‘viable’ business. This means it should have been trading successfully prior to COVID-19 but is now incurring, or will incur, a loss of revenue with the consequent disruption to their cash flow as a result of the pandemic.

To help you assess the impact of reduced income and prepare your application, try our online Business Equation tool. You can use this to create a budget based on likely financial scenarios and generate a cash flow projection to give you a picture of the health of your business. We recommend forecasting both a pessimistic and a cautiously optimistic budget and cash flow projection, so you know what the best and worse-case scenarios could be.

We suggest updating the Business Equation regularly to project possible problems with your reserves: forewarned is forearmed. In this unpredictable environment, planning is even more vital.

For a full list of measures announced by the government, please visit their website here.

‘Key features’ of the Coronavirus Business Interruption Loan Scheme

Under the CBIL Scheme, SMEs can access loans, overdrafts, invoice finance and asset finance of up to £5 million through accredited lenders, including all the major banks.

Businesses will be able to borrow up to £250,000 without the need for personal guarantees – which means you don’t become personally responsible if your business can’t repay the debt. For anything over £250,000, lenders may require personal guarantees in agreement with their policies, but homes (principal private residences (PPR)) cannot be part of the security.

Businesses may also be able to benefit by deferring interest payments, fees, and application charges for the initial 12 months. Some lenders are also offering a six-month capital repayment holiday from the start of the facility.

The government is providing lenders with a guarantee of 80% on each loan to give lenders further confidence in providing financial support to SMEs.

Where and when to apply for a Coronavirus Business Interruption Loan Scheme

You can access the scheme directly from the bank you usually use for your business.

Any business with concerns about their finances that want to access a CBILS facility, should contact their lender as soon as possible. Currently, due to the high volume of applications for immediate support, banks and lenders are requesting clients start their application process online for an initial eligibility test.

Eligibility criteria for the scheme

Your business may be eligible if it:

  • has been, or will be, negatively impacted by the coronavirus
  • is based in the UK
  • is currently trading and can demonstrate it is a viable business
  • has been trading for over 12 months with a turnover of no more than £45 million per annum or has been trading for less than 12 months and is not expecting a turnover over £45 million within the first 12 months of activities
  • seeking a facility up to £5 million
  • does not operate in an excluded sector
  • is not undertaking or considering liquidation proceedings

How do you demonstrate viability?

With any financial application, the lender will need to assess your business’ ability to repay the loan. The government has designed CBILS to support businesses with financial difficulties created by the disruption caused by the pandemic. Therefore, a viable business needs to demonstrate that it would have traded successfully if the disruption had not occurred.

Lenders will require their own procedures to be completed and will almost certainly request detailed information.

The usual procedure is to request the following reports:

  1. Previous years’ financial statements for limited companies, or accounts for sole traders or partnerships.
  2. Management accounts from the date of the last financial statements.
  3. A budget and cash flow forecast which will be based on projections for at least the next 12 to 18 months. Don’t forget to try our online Business Equation tool and cash flow projection to test different scenarios.

 And possibly

  1. Details of assets and liabilities.
  2. A business plan to support the projections.

Interest terms

The CBIL scheme covers loans from £25,000 to £5,000,000 with terms between one to six years: arrangement fees and interest will be charged.

Under the scheme, businesses are not required to pay the interest or arrangement fees for the first 12 months. Some lenders may also provide a capital repayment holiday period, usually up to six months. However, these terms will be subject to each individual lender’s terms and conditions. The sentiment is that lenders should consider the government’s 80% guarantee and therefore charge low interest rates due to the low risk involved.

Businesses that borrow under the CBIL scheme will not be subjected to any early repayment charges should the business decide to repay their liability before the term ends.

Notwithstanding the limited guarantee from the Government, businesses remain 100% liable for repaying the debt, including any accrued interest. The Government is underwriting the banks in the event that the loan turns bad.

Suitability and sector restrictions

CBILS is suitable for businesses that:

  • need a loan for working capital, expansion projects, diversification, or development
  • need a loan for more than £250,000 but do not have enough security to meet conventional lending requirements, or
  • need a loan for less than £250,000 which would not have been provided without the availability of the CBIL scheme

Restrictions may apply in the following sectors:

  • agriculture
  • aquaculture
  • fisheries
  • transport

Further details can be found on the British Business Bank website.

How to increase your chances of a successful application

The key to a successful application is being fully prepared with the financial information you need to supply. That’s why we recommend businesses consult us at This email address is being protected from spambots. You need JavaScript enabled to view it. to discuss your lender’s requirements and the financial information you propose to submit to them. 

Currently, more than 40 lenders are issuing CBILS and they are under enormous pressure to deal with the many thousands of applications that have come in so far. But businesses are concerned about lenders failing to respond quickly to initial requests – which is why the new ‘Bounce Back Loan’ has been introduced. It’s therefore vital to have a proactive approach and provide lenders with a solid application and accurate supporting information, no matter which loan you apply for. Our expertise and commercial background will help you deliver this.

To ensure you receive your loan as quickly as possible to finance your business activities, you need to start your application as soon as possible. Let us help you navigate the process. For more details and a bespoke consultation, please contact us by emailing: This email address is being protected from spambots. You need JavaScript enabled to view it. or calling us on 0208 5912391.

 

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