Announcing his budget, the chancellor acknowledged that the coronavirus outbreak is likely to disrupt the economy. To help mitigate the impact of the outbreak on SME businesses, one of the initiatives the government is looking to introduce is the “Coronavirus Business Interruption Loan Scheme” (CBILS).
Q. HOW DOES CBILS WORK?
CBILS is expected to operate in a similar way to Enterprise Finance Guarantee (EFG) and will be provided by the British Business Bank, at more favourable rates than the EFG for both, the businesses and the lenders. The government will provide lenders with a guarantee of 80% on each loan to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge borrowers or the lenders for this guarantee, with the scheme expected to support loans of up to £5m in value.
Q. IS THE GOVERNMENT LIABLE FOR THE LOAN?
No. The borrower will remain 100% liable for the loan. The guarantee mechanism has been designed to provide more confidence to the lenders.
Q. WILL CBILS ONLY APPLY TO TERM LOANS?
CBILS is expected to support a wide range of business finance products, including:
- Term Loans
- Asset Finance
- Invoice Finance
- Overdrafts
Q. WHAT IS THE ELIGIBILITY CRITERIA FOR CBILS?
To qualify for funding via CBILS, the business must;
- Be based in the UK
- Not have turnover more than £45m per annum
- Operate within an eligible sector
- Have a strong business case, but insufficient security to meet the lender’s normal requirements
- Be able to confirm that they have not received de minimis State aid beyond €200,000 equivalent over the current and previous two fiscal years
Q. WHICH SECTORS ARE INELIGIBLE FOR CBILS FUNDING?
The ineligible and the sectors with limited eligibility can be found using the following link:
Q. HOW CAN I APPLY FOR CBILS?
The British Business Bank will be delivering the scheme in collaboration with its accredited partners. The businesses looking for funding via CBILS will need to make an application with one of the 40 plus accredited lenders and partners to ascertain if they can qualify for funding using CBILS. Based on the application the lender will determine whether the business can qualify for funding under normal commercial terms. If so, the lender will not use CBILS to offer funding. Where the business has a sound proposal but no adequate security the lender will consider supporting the business using CBILS.
Your advisor will guide you on how to draft a robust business plan. You can prepare and submit the application directly, without using an advisor, to any of the accredited lending partners but it’s extremely important that your business plan looks credible.
Q. WHAT IS THE LIKELY DEBT SERVICE COST?
Under the terms of the CBILS businesses will have a payment holiday for first 12 months of the loan. The debt service cost following the first 12 months depends on the lender you have selected. You can ask your lender or your advisor to give you an indication of the likely debt service costs before you get an offer from the lender specifying the relevant interest rate to apply to your loan.
Q. WHEN CAN I APPLY FOR CBILS FUNDNG?
The loan applications for CBILS are now being accepted by the lenders. It would be useful speaking to your advisors to assess your eligibility for the loan and how best to proceed with making the application.
Should you wish to discuss any aspects of our guidance notes, please feel free to contact Ali Raza directly by email – ali@aw-capital.co.uk
To find out about The Recovery Loan Scheme please click here
