Coronavirus Business Interruption Loans (CBILS)

Please note that the Coronavirus Business Interruption Loan Scheme (CBILS) has now ended (31 March 2021) and has been replaced by the Recovery Loan Scheme Announced which will start on 6th April 2021.

What is CBILS?

The Coronavirus Business Interruption Loan Scheme (CBILS) is provided through the British Business Bank and a group of accredited providers. It’s primarily focused on providing financial support to SMEs who have experienced lost revenue and cash flow disruptions as a result of coronavirus. 

Who is eligible for CBILS?

SMEs from all sectors (excluding certain financial services and public sector organisations) can apply for the full amount of the facility up to a maximum of £5m.

The business must be:

• UK based with UK activity and an annual turnover of no more than £45m
• Have a borrowing proposal that would be considered viable by the lender, were it not for the current pandemic
• Demonstrate to the lender that the provision of finance will allow the business to trade out of any short to medium term financial difficulty.

What does viable mean?

The decision of what viable means is a credit decision for individual lenders. In practice this is likely to be a combination of the performance of the business prior to the outbreak of Covid-19, the demonstrable impact the virus has had on the trading of the business (i.e. partial or total loss of revenue, supply chain interruption etc.), the actions the business has taken to manage this impact and how the business will trade out of the current position with the support of the finance being requested.

What information will I need to provide?

The information required will vary by lender and product but as a minimum will include the following:

• Detailed management accounts for a reasonable period to support the historic trading of the business (this could be up to the last three years)
• Management information for February (and March month to date) even if these are not ordinarily prepared (i.e. if you do quarterly management accounts or no management accounts) to show how the pandemic has impacted on the business. This can be taken directly from your accounting system if needed.
• A summary of what has caused the impact – i.e. leisure business forced to close due to social distancing measures has dramatically reduced revenue, measures taken in other countries have disrupted supply chain etc.
• A summary of actions the business has taken to manage the impact of the virus such as closing sites, employees furloughed, negotiations of payment terms with suppliers, negotiation of holidays with existing finance providers etc. and the financial impact these will have on the ongoing trading performance of the business
• Details of how the business will trade out of the current situation i.e. a set of financial projections showing P&L, balance sheet and cash flow, and the assumptions supporting these projections.
• Additional information which may be relevant for Asset Finance or Invoice Finance applications includes aged debtor reports, customer contracts etc. Businesses should look at a variety of scenarios when considering how they will trade out of the current situation, looking at the impact of the pandemic lasting for the short (3 months), medium (6 months) and long term (12 months).
• Armstrong Watson are working with a number of businesses to support short term cash planning and longer-term forecasting to support both general business planning and CBILS applications. To comply with social distancing guidance, lenders will be trying to conduct business remotely and therefore, you will need to be able to provide any information the lender requires digitally where possible.

How do I apply?

The list of participating lenders is available and is updated as new lenders are accredited under the scheme. If your existing bank or lender is on the list of accredited partners then they should be your first port of call. Understandably institutions are prioritising their existing customers when the volume of enquiries is expected to be incredibly high. Advice is to where possible; make applications online as phone lines are likely to be extremely busy.

I’ve heard something about no personal guarantees?

This is something that has moved substantially over recent weeks. While initially personal guarantees were required, for loans under £250k, no personal guarantees are required. It is worth noting that the banks’ lending criteria will still apply.

• For any borrowing above £250,000 personal guarantees will be capped at 20% of the outstanding value of the loan, as the Government is providing the guarantee for the remaining 80% of the finance. Certain lenders have waived personal guarantees altogether. This will apply to all customers that have secured a loan under the scheme since its launch on 23rd March.
• As yet, we don’t know to what extent this impact on the CBILS

What about other costs?

Unlike Enterprise Finance Guarantee scheme loans, there is no guarantee fee payable by the SME. The government will also cover any interest and lender levied fees in the first 12 months.

• There are therefore no upfront costs to SMEs and reduced initial repayments (this may not apply in full for a certain fishery, aquaculture and agriculture business). What do we know about the Coronavirus Large Business Interruption Loan Scheme (CLBILS)? • The new CLBILS scheme will launch later this month (April) and we expect it to look very much like the existing CBILS.
• To be eligible, your business must:
  
  • Be UK-based in its business activity
  • Have an annual turnover of between £45 million and £500 million
  • Be unable to secure regular commercial financing
  • 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