Coronavirus Business Interruption Loan Scheme (CBILS) – Some Guidance
Wednesday 8 April 2020 – Please forgive the mid-week intrusion.
On 17 March The Chancellor Rishi Sunak said government-backed packages worth £330 billion will be made available to support the economy amid the coronavirus pandemic. He also said the “unprecedented package” could go further if demand is greater and vowed to do “whatever it takes” to help the economy. £1 billion of this amount was to be used to create a new temporary Coronavirus Business Interruption Loan Scheme to support businesses in all parts of the UK through bank lending.
In the following days The Chancellor was questioned on the loan measures and he said, “As helpful as giving a cash grant is, we do not have any control over how that money is spent. The £330bn is built up of guarantees that mean any business which needs access to cash to pay their rent, salaries, suppliers or purchase stock, will be able to access a government-backed loan”.
From our experience the first wave of applicants has experienced difficulties in overcoming bank credit decision makers, who have for the last 10 years or so been working on their employers’ own balance sheets rather than those of the wider economy. Whilst we would never support irresponsible lending this is an entirely different set of circumstances the country is facing and to apply past practices and lending criteria to todays critical needs is simply not going to work.
There is no on-line application process, you must go through your business manager, if you have one, or call centre if you don’t. This has frustrated many businesses in getting quick reassurance that support will be available.
On Monday (6 April) the scheme saw some changes:
“CBILS has been significantly expanded along with changes to the scheme’s features and eligibility criteria. The changes mean even more smaller businesses across the UK impacted by the coronavirus crisis can access the funding they need.
Importantly, access to the scheme has been opened up to those smaller businesses who would have previously met the requirements for a commercial facility but would not have been eligible for CBILS. Insufficient security is no longer a condition to access the scheme.”
If you are thinking about applying for CBILS finance, then you must prepare your application carefully to ensure greater likelihood of success. See the following website:
Key point from this website:
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 current pandemic
- Self-certify that it has been adversely impacted by the coronavirus (COVID-19).
DETAILS OF THE LOAN
- The amount you would like to borrow
- What the money is for — the lender will check that it’s a suitable business purpose and the right type of finance for your needs
- The period over which you will make the repayments — the lender will assess whether the loan is affordable for you
You will need to provide certain evidence to show that you can afford to repay the loan. This is likely to include:
- Management accounts
- Cash flow forecast
- Business plan
- Historic accounts
- Details of assets
See also this useful lending application checklist: https://www.british-business-bank.co.uk/wp-content/uploads/2020/04/BBF_factsheet_-_lending_application_checklist.pdf
We will be here to assist clients with their applications, if help is required.
From experience, it is certainly worth appealing any refusal from lenders. Banks have been known to come back with alternative facilities in the form of overdraft, invoice discounting or asset finance and lending criteria changes as days go by.
Please do speak to Mostons before making any commitments to new arrangements. Remember that these are loans not hand outs and they will need to be repaid.