THE CBILS SCHEME HAS NOW CLOSED AND HAS BEEN REPLACED WITH THE RECOVERY LOAN SCHEME. VISIT THE RECOVERY LOAN SCHEME FAQ PAGE
The chancellor has announced amendments and an extension to the CBILS scheme. It appears there has, so far, been over 130,000 applications but less than 1,000 approvals. Therefore, one of the changes will be to streamline and speed up the banks’ processes.
Key changes as follows, which will apply from 6th April:
- The scheme has been opened up to those smaller businesses that would have previously met the requirements for a commercial facility (or in simpler terms – a commercial loan) but would not have been eligible for CBILS. Insufficient security is no longer a condition to access the scheme.
- Under the scheme, personal guarantees of any form will not be taken for facilities below £250,000.
- For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but these will be capped at a maximum of 20% of the facility (20% of the balance outstanding after the proceeds of business assets have been applied). Home cannot be taken as security to support a personal guarantee or as security for a CBILS-backed facility.
- The government will make a Business Interruption Payment to cover the first 12 months (previously 6 months) of interest payments and any lender-levied charges.
What is the Coronavirus Business Interruption Loan Scheme (CBILS)?
CBILS is a scheme for businesses across the UK that are experiencing lost revenue due to the coronavirus, causing cash flow issues within their business. It is a temporary measure, administered by the British Business Bank, and will be available to businesses via accredited lenders.
What are the key features of the scheme?
- The maximum amount available is £5m.
- Loans and assets finance will have repayment terms of up to six years, although lenders have been given the option to extend this to ten years. Overdrafts and invoice finance will be up to three years.
- The loan will be interest-free for 12 months, and the government will cover any fees.
- Unsecured lending may be available up to £250,000. Any loans above this amount must be secured.
- SMEs don’t need to pay a guarantee fee
- There is an 80% government-backed guarantee, however, the borrower always remains 100% liable for the repayment of the debt
- Some lenders are offering Capital Repayment Holidays for 12 months – so you may not have to make any payments in the first year.
What are the eligibility criteria?
You must submit a borrowing proposal to the lender which, ‘were it not for the current pandemic, would be considered viable by the lender’. It’s important to remember, this is not the only government support announced and the other measures may be more suitable for your individual position. You must be able to answer yes to all of the following questions to be eligible for the loan:
- Your application must be for business purposes
- You must be a UK-based SME with an annual turnover of up to £45m
- Your business must generate more than 50% of its turnover from trading activity
- Your CBILS-backed loan will be used to support primarily trading in the UK
- You wish to borrow up to a maximum of £5m.
- Your business was not classed as a “business in difficulty”? on 31 December 2019, if you are applying to borrow £30,000 or more
For the purposes of clarity, an SME is defined as ‘a company with a turnover of no more than £45m and meet certain other criteria, such as having fewer than 250 employees’.
How do you access the scheme?
The British Business Bank has a list of accredited lenders. You are advised to apply on the lender’s website and follow the steps. Should you need support with the loan application process or want to talk through your funding needs, HB&O has dedicated specialists that will be able to help.
What type of businesses are eligible?
The scheme is open to sole traders, freelancers, limited partnerships, limited liability partnerships or any other legal entity trading in the UK, who can answer yes to the five questions in the eligibility section above.
I am getting other kinds of COVID-19 financial assistance from the government – can I still get a loan?
Yes, lenders will not take into account any other coronavirus government support that you have received, for example, business rates relief or grants.
What types of finance are available?
CBILS supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance facilities. Not every accredited lender can provide every type of finance available under CBILS, and the amount of finance offered varies between lenders. You should refer to the lenders’ websites for more information on the amounts they are able to offer.
Can finance under CBILS be used to refinance an existing commercial loan or finance facility?
In certain circumstances, you can use a CBILS facility to refinance existing debt. For example, where you are seeking to put your business on a more stable financial footing and/or improve your working capital position. However, you will need to go through the application process in relation to a CBILS facility and you will need to fulfil the eligibility criteria. Refinancing can be undertaken with or without an increase in the original borrowing. Any refinancing will be treated as a new facility. When using a CBILS facility to re-finance an existing commercial facility with the same lender, the lender will be subject to certain limits. However, if the existing debt is held with another lender to the one you are seeking to obtain a CBILS facility from, those lender limits no longer apply.
Will I need security to get a CBILS-backed loan?
Under the scheme, lenders will not take personal guarantees of any form for facilities below £250,000. For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, 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.
For all facilities, including those over £250,000, CBILS can be used to support lending even where a lender considers there to be sufficient security. However, where there is sufficient security available, it is likely that the lender will use this security to partially support any finance facility.
How long will CBILS run for? [Updated 18.12.2020]
CBILS was initially set to run for six months, however, due to the ongoing effects of the pandemic, the deadline is now 31 March 2021. The government announced the replacement scheme, the Recovery Loan Scheme, during the Budget 2021. Visit our dedicated FAQ page for the CB scheme
Can I apply for more than one CBILS facility?
Yes. You can take out more than one CBILS facility, including a combination of loans and asset backed finance, subject to the lenders’ agreement and providing that the total amount of finance facilities received under CBILS does not exceed 25% of the business’s annual turnover or £5m, whichever is the lower.
How can HB&O help?
We are offering a free loan application review for our clients. We’ll take a look at your application before you submit it to the lender, offering guidance for any necessary changes and highlight any additional information you may need to include to improve the likelihood of your application being approved.
Already submitted an application that has been rejected? Don’t worry! If you are turned down by one lender, you can still apply to another – there are over 40 approved lenders available. We can review your next application before you submit it to check it’s all in order.
If you’d like further information on the loan application review service, need assistance in accessing finance, or in preparing the necessary forecasts or financial information requested by a lender, please contact HB&O’s Corporate Finance Director, Greg Philp, or senior advisor, Holly Andrews or call 01926 422292.
Struggling to complete the application yourself? If you’d prefer, we can prepare and submit the whole application on your behalf. For more information on this service, including pricing, please contact Greg who will be happy to help.