Coronavirus Business Interruption Loan Scheme (CBILS) – Updated.

WHAT IS CBILS?

CBILS has been put in place to make loans available to eligible businesses across the UK who are experiencing lost or deferred revenues caused by the Coronavirus crisis leading to disruptions to their cashflow.

CBILS is now available through participating lenders and will initially run for six months.

The Government is periodically publishing updates here.

IS MY BUSINESS ELIGIBLE?

The key criteria are that your business:

• is UK based in its business activity;
• has an annual turnover of no more than £45 million;
• operates within an eligible industrial sector (a small number of industrial sectors are not eligible for support under CBILS – see here)
• generates more than 50% of its turnover from trading activity: and
• has a borrowing proposal which, were it not for the Coronavirus crisis, would be considered viable by the Accredited Lender, and for which the Accredited Lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty.

Sole traders and freelancers are eligible as long as business activity is operated through a business account.

Any other Government aid received in response to the Coronavirus crisis should not impact your eligibility for CBILS.

The Government says if the Accredited Lender can offer finance on normal commercial terms without the need to make use of CBILS, they will do so.

NB: The Government has now said that any previous de minimis state aid received in the past will not impact your eligibility for CBILS and does not need to be taken into account by the Accredited Lender.

WHO IS PROVIDING THE LOANS?

CBILS will be available through an Accredited Lender.  You can find a list of the Accredited Lenders here.

Mundays Tip:  Banks will be prioritising their existing customers so your first port of call should be your current Bank/Relationship Adviser.   

If you already have existing lending facilities in place with the Accredited Lender then this should help to streamline the process.

WHAT ARE THE LOAN TERMS?

The key loan terms are:

• Amount: up to £5 million
• Term: up to 6 years for term and asset finance: up to 3 years for overdrafts and invoice finance.
• Interest Rates: Expected to be ‘low’ interest rates but we await further details
• Fees: no guarantee fee for SMEs: some Accredited Lenders may charge arrangement fees or early repayment charges so you should check this with the Accredited Lender.

The Government will cover the first 12 months of interest and any lender-levied payments although fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment. The borrower remains liable for 100% of the debt and for repayments of the capital in the usual way during the term of the loan.

If an Accredited Lender approves your business for CBILS the Government will guarantee the Accredited Lender 80% of the loan.

NB: The CBILS guarantee is to the Accredited Lender and not the borrower so you will still be liable for 100% of the debt.

WILL I BE REQUIRED TO PROVIDE SECURITY FOR THE LOAN?

• At the discretion of the Accredited Lender, CBILS may be used for unsecured lending for facilities of £250,000 and under.

Mundays Tip: If you already have lending facilities in place with the Accredited Lender and they already have security, you should ask whether this will be sufficient security to cover the 20%.

• For facilities above £250,000, the Accredited Lender must establish a lack or absence of security prior to businesses using CBILS. 

NB:A Primary Residential Property cannot be taken as security under CBILS.  An Accredited Lender cannot take a personal guarantee to cover the 20%.

WHAT TYPES OF LOAN ARE AVAILABLE?

This will depend on the Accredited Lender but CBILS includes:

• Term loans.
• Overdrafts.
• Invoice finance.
• Asset finance.

WHAT SHOULD I DO TO APPLY?

The Accredited Lender will risk assess applicants in line with their usual lending process so you should contact them in the first instance for details of how to apply.

You must show in your borrowing proposal that were it not for the Coronavirus crisis, your business would be considered viable by the Accredited Lender, and for which the Accredited Lender believes the provision of finance will enable your business to trade out of any short-to-medium term difficulty.

Mundays Tip: We suggest that you do the following as soon as possible as the Accredited Lender will likely request these as part of their application process:

• ensure your latest statutory accounts are fully-up-to date and filed.
• ensure your management accounts are fully up-to-date.
• generate a 12-month cash flow forecast to demonstrate your peak cash requirement and when you expect this to turn around and return to positive – some businesses are working on the basis of a 12-week lockdown and others are suggesting disruption will continue until September 2020.  However, it is impossible at this stage to predict with certainty how long the disruption will continue.

Should you need someone to help you produce any of the items above we can provide the name of a recommended provider where appropriate.

WHAT ABOUT THE ENTERPRISE FINANCE GUARANTEE SCHEME (EFG)?

The EFG Scheme is temporarily suspended so you should discuss your eligibility under CBILS with an Accredited Lender instead.

If you have a query about your existing EFG facility then you should discuss this with your Bank.

WHAT IF I AM NOT ELIGIBLE FOR CBILS?

• The Government has provided details of other schemes to help businesses through the Coronavirus crisis.  We will continue to provide further updates as details are announced.

• Mundays can help you to take other practical steps to protect your business in these very difficult times.  For example, if you have any queries on commercial contracts, force majeure, employment matters or cancellations then please contact one of our team and we will be happy to discuss this with you. 

If you have any queries please call Howard White on 01932 590 696 or Ben Martin on 01932 590 655 in the first instance and they will be able to direct your query.

Mundays Tip: You should call HMRC’s Coronavirus Helpline on 0800 015 9959 if you cannot pay tax due to Coronavirus.

The contents of this article are intended as guidance for readers. It can be no substitute for specific advice. Consequently we cannot accept responsibility for this information, errors or matters affected by subsequent changes in the law, or the content of any website referred to in this article. © Mundays LLP.