Coronavirus Business Interruption Loan Scheme (CBILS) – FAQ
What is the Coronavirus Business Interruption Loan Scheme (CBILS)?
The Coronavirus Business Interruption Loan Scheme (CBILS) provides financial support to smaller businesses (SMEs) across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak.
CBILS supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance facilities.
CBILS gives the lender a government-backed guarantee for the loan repayments, however the borrower remains fully liable for the debt.
What are the new changes to CBILS?
Initially, if a lender was not able to grant finance under its normal criteria, then they will look at a business’ eligibility under CBILS, however due to pressure from the press and businesses that were unable to obtain CBILS finance, from 3 April 2020 the government is now taking further action to support firms affected by the COVID-19 crisis by bolstering the scheme.
To maximise the support available, the government is extending the CBILS so that all viable small businesses affected by COVID-19 can access CBILS and not just those unable to secure regular commercial finance. The government is also stopping lenders from requesting personal guarantees for loans under £250,000 (previously this was at the discretion of the lender), this is along with making operational changes to speed up lending approvals.
The expanded scheme will be operational with lenders from Monday 6 April 2020.
Who is eligible?
Your business must:
- Be UK-based in its business activity
- Have an annual turnover of no more than £45 million
- Have a borrowing proposal which the lender:
- would consider viable, were it not for the COVID-19 pandemic
- believes will enable you to trade out of any short-term to medium-term difficulty
Businesses from any sector can apply, except the following:
- Banks and building societies
- Insurers and reinsurers (but not insurance brokers)
- Public-sector organisations, including state-funded primary and secondary schools
- Employer, professional, religious or political membership organisations
- Trade unions
Will the changes be applied retrospectively?
Yes – the changes will be applied by lenders retrospectively for any CBILS facilities offered since 23 March 2020.
For any commercial (non-CBILS) facilities offered since 23 March 2020, lenders have been asked to bring these facilities onto CBILS, this is where the borrowers meets the eligibility criteria. These changes made retrospectively will be applied as necessary.
When can I access the scheme?
The scheme went live on Monday 23 March and will initially run for six months. The expanded scheme will be offered by lenders from Friday 3 April 2020 and operational from Monday 6 April 2020.
How long is CBILS available for?
CBILS is initially available for 6 months.
What types of finance are available?
CBILS supports a wide range of business finance facilities, including:
- Term loans
- Asset finance
- Invoice finance
Please note that not all lenders can provide every type of finance listed.
What is the maximum amount of a facility?
The maximum value of a facility provided under the scheme is £5 million, available on repayment terms of up to six years.
Loans are limited to a maximum of 25% of 2019 turnover or double annual wage bill, whichever is greatest.
What are the finance terms for CBILS?
For term loans and asset finance facilities, up to six years and for overdrafts and invoice finance facilities, up to three years.
Are securities and personal guarantees needed for CBILS?
From 3 April 2020, insufficient security is no longer a condition to access the scheme.
There are no personal guarantees for facilities under £250,000.
For all facilities, including those over £250,000, CBILS can now support lending to smaller businesses even where a lender considers there to be sufficient security, making more smaller businesses eligible to receive the Business Interruption Payment.
Personal guarantees may still be required, at a lender’s discretion, for facilities above £250,000, but they exclude the Principal Private Residence (PPR) and recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied.
If a personal guarantee is taken out, will I be liable for the full defaulted balance?
For CBILS facilities above £250,000, Personal guarantees may still be required, at a lender’s discretion. Recoveries are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been taken into account.
A worked example:
- £2,000,000 Loan
- Business pays off £800k, then defaults, owing £1,200k
- The lender recovers a further £300k from other business assets secured within the agreement, (i.e. business assets), leaving £900k outstanding
- Lender will call on the Personal Guarantee of £180k (20%), leaving £720k owed to the bank. Before the changes on 3 April 2020 the full £900k would have been called on.
- Government covers £576k, Lender loses £144k
Are CBILS interest and fees free?
The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied charges
Are there fees to borrow under CBILS?
There are no guarantee fees for SMEs. Lenders will have to pay a fee to access the scheme.
How do you apply for CBILS?
The CBILS is available through more than 40 accredited lenders across the UK. Additional lenders are applying and successfully gaining accreditation, which is creating more choice and diversity of supply for small businesses.
See the link from BBB for details on steps how to apply and the list of lenders.
In the first instance, businesses should approach their own provider – ideally via the lender’s website (due to the large volume of calls at present).
Do I need to be a viable business to get access to CBILS?
The business must 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 the business to trade out of any short-to-medium term difficulty.
This is a very important condition and having a sound borrowing proposal to assist with applications is very much needed. It would be wise to discuss their applications with their preferred lender, accountant or business advisor.
The scheme is designed to support those business that were trading successfully before COVID-19, but now face difficulties as a result.
What is the lending criteria?
Please note all lending decisions remain fully with the lenders. Therefore, each lender will have its own specific requirements and risk profiles which enable them to make their own lending decisions.
At present the majority of lenders are only providing CBILS to existing customers.
Normal finance applications will need to be completed, which means a sound borrowing proposal. It is not known what the individual lenders require, however we can assume the following as part of a proposal:
- Recent submitted accounts
- Management accounts
- Profit forecast (with detailed commentary)
- Cashflow forecast (with detailed commentary)
- Details of level of funding needed.
Commentary is very important, commentary needs to cover where the business was before the crisis, what the crisis has done to the business and how finance will help business overcome the short-medium terms impacts of COVID-19.
Majority of banks are now providing customers with application forms designed specifically with COVID-19 in mind, however, please check with individual lenders for their specific lending criteria.
If my application is unsuccessful, can I apply to another lender?
Yes – If the application with your existing lender is unsuccessful, businesses can go to another lender,
See the link from BBB for the list of accredited lenders.
What if my business has turnover of more than £45m and I would not be eligible for CBILS?
The new Coronavirus Large Business Interruption Loan Scheme (CLBILS) was announced on 3 April 2020 and it follows on from the CBILS for larger companies. CLBILS will breach the gap between large companies which do not have an investment grade or a material impact on the economy and give these businesses access to finance in these difficult times.
It will provide a government guarantee of 80% to enable banks to make loans of up to £25 million to firms with an annual turnover of between £45 million and £500 million.
This will give banks the confidence to lend to more businesses which are impacted by COVID-19 but which they would not lend to without CLBILS. Loans backed by a guarantee under CLBILS will be offered at commercial rates of interest.
Further details of the scheme will be announced later in April 2020.
I am in receipt of other government support in response to the COVIS-19. Can I still get a loan?
Yes- you will still be eligible for a loan, however certain payments you receive in support may count towards the amount of Business Interruption Payment (BIP).
You will be entitled to payments that the UK Government make to cover interest and fees on your loan. In this instance, these payments are made under the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak.
Is not yet currently known if any other payments will count towards the BIP
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