What is the Coronavirus Business Interruption Loan Scheme (CBILS)?

The UK Government has announced a scheme to provide finance facilities for smaller businesses experiencing cash flow difficulties from trading due to the coronavirus pandemic. The scheme has been expanded from the initial announcement to include smaller businesses who would previously have been able to access commercial facilities from the financial providers

Guidance Note

Coronavirus Business Interruption Scheme (CBILS)

Please be aware that this note is based on the information published as at 09 April 2020 and is intended to provide guidance on how Foremans LLP believe at this juncture the scheme will be implemented. The below is based on Foremans LLP’s interpretation of the available information. You should not regard this as advice on how the scheme will operate as the scheme is continuing to develop.

We have compiled some frequently asked questions which may help to explain our understanding of the scheme:

What is the Coronavirus Business Interruption Loan Scheme (CBILS)?

The UK Government has announced a scheme to provide finance facilities for smaller businesses experiencing cash flow difficulties from trading due to the coronavirus pandemic. The scheme has been expanded from the initial announcement to include smaller businesses who would previously have been able to access commercial facilities from the financial providers

What finance is available?

A lender can provide up to £5 million in the form of:

·         Term loans

·         Overdrafts

·         Invoice Finance

·         Asset Finance.

Are interest and fees charged?

Yes. However, the Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied charges.

There are no guarantee fees for SME’s.

Lenders pay a fee to access the scheme.

What are the Finance terms?

For term loans and asset finance facilities – up to 6 years

For overdrafts and invoice facilities – up to 3 years.

How is this different to normal commercial finance?

CBILS gives the lender a government backed guarantee for the loan payment.

Under the scheme no personal guarantee is required for facilities below £250,000.

Facilities above £250,000 may still require a personal guarantee but these are restricted:

·         A Principal Private Residence (PPR) cannot be taken as a security to support a personal guarantee or as a security for a CBILS backed facility;

·         Recoveries are capped at a maximum of 20% of the outstanding CBILS facility after the proceeds of business assets have been applied.

Who Can Claim?

SME’s from all sectors can apply for the full amount of the facility up to £5 million.

To be eligible your business must:

·         have UK based business activity;

·         Turnover less than £45 million

·         A borrowing proposal which the lender would consider viable if it were not for the Coronavirus pandemic;

·         Self certify that the business has been adversely impacted by the coronavirus.

Access to the scheme has been extended, since the initial announcement, to include smaller businesses who met the requirements for a standard commercial facility.

What is the definition of a SME for CBILS?

The SME definition for CBILS is that the applicant turnover must be less than £45 million.

The borrower cannot be an individual except where the individual is:

·         A Sole Trader

·         Partner in a partnership.

How do I access the scheme?

CBILS is being provided by over 40 British Business Bank’s accredited lenders. A full list is noted on:

https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils-2/current-accredited-lenders-and-partners/

·         High Street Banks

·         Challenger Banks

·         Asset Based Lenders

·         Smaller Specialist Local Lenders.

Who is liable for the debt?

The borrower remains fully liable for the debt.

How do I apply?

1.      Find a lender

You may initially wish to approach your business bank provider.

2.      Approach a lender.

You should approach a lender yourself ideally through their website.

3.      The Lender will make a decision

The lender will decide whether to offer you finance.

4.      If the Lender turns you down

If one lender turns you down, you can still approach other lenders within the scheme.

What if I was turned down before the scheme was extended?

You may wish to recontact the Lender who turned you down as the scheme rules have changed.

What will the Lender need to know?

Most lenders will ask you for:

·         How much you wish to borrow;

·         What the money is for;

·         The period over which you intend to make repayments.

You may also need supporting documents. For example:

·         Historic accounts

·         Business plan

·         Cash flow forecast

·         Details of the business’s assets

Further useful information can be found at The British Business Bank website:

https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils-2/for-businesses-and-advisors/

If you would like to discuss any of the issues noted above, please contact us on:

01244 625 500 or 01978 364 000

contactus@foremansllp.com

Whilst all due care and attention has been taken in the preparation of these notes no liability can be accepted for any omission or item contained therein.