The Coronavirus Business Interruption Loan Scheme
Last updated 25th September 2020
*** As announced by the Chancellor on 25th September, the Government have introduced a ‘Pay as You Grow’ scheme for businesses which took out government-guaranteed loans during the crisis allowing. Loans taken out under the Bounce Back Loan Scheme or the Coronavirus Business Interruption Loan Scheme (CBILS) can be extended from six to ten years. Businesses who are struggling can choose to make interest-only payments and can apply to suspend repayments altogether for up to six months***.
The Coronavirus Business Interruption Loan Scheme (CBILS) was announced by the Chancellor in the budget and has been extended since to provide greater support to business during these difficult times. The scheme is now live and the key features and how to apply are found below.
It is important that you submit a strong lending proposal which should include the following:
- Commentary, supported by financial analysis, demonstrating that you had a sound business prior to COVID-19
- Clear description of how COVID-19 has impacted your business
- The self-help measures you have taken to address the current trading difficulties and details of your current working capital position
- Description of how the business will look post COVID-19 and how the CBILS loan will help you achieve the transition
- Forward plan clearly demonstrating that you have a viable business going forward and one that can service your existing and the additional debt
Loan applications will be assessed according to the bank’s normal lending criteria and approval is not an automatic right. Therefore, you should seek appropriate financial advice prior to submitting a proposal to maximise the chances of success.
- Up to £5m facility
- 80% guarantee – the scheme provides the lender with a government-backed, partial guarantee (80%) against the outstanding facility balance, subject to an overall cap per lender
- No guarantee fee for SMEs to access the scheme
- Interest and fees paid by the Government for 12 months
- Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.
- At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under.
Latest updates (as of 3 April 2020)
- Applications will not be limited to businesses that have been refused a loan on commercial terms, extending the number who benefit. However, the Treasury has not capped the interest rates banks can charge.
- Banks will be banned from asking company owners to guarantee loans with their own savings or property when borrowing up to £250,000
- Larger firms with a turnover of up to £500m will also be eligible for more help – with state-backed loans of up to £25m available to firms with revenues of between £45m-500m.
What types of finance are available?
CBILS supports a wide range of business finance facilities, including:
- Term Loans
- Asset Finance
- Invoice Finance
NB – Not every lender can provide every type of finance listed.
The scheme is designed to support smaller businesses (SMEs) who don’t meet a lender’s normal lending requirements for a fully commercial loan or other facility, but who are considered viable in the longer-term.
To help you understand if you may be eligible to apply, please ensure you can answer YES to the following:
- Your application must be for business purposes
- You must be a UK-based SME with an annual turnover of up to £45m (Larger firms with a turnover of up to £500m will also be eligible for more help – with state-backed loans of up to £25m available to firms with revenues of between £45m-500m)
- Your business must generate more than 50% of its turnover from trading activity
- Your CBILS-backed facility will be used to support primarily trading in the UK
- You wish to borrow up to a maximum of £5m. (Finance terms are to six years for term loans and asset finance. For overdrafts and invoice finance facilities, terms will be up to three years).
How to apply
CBILS is available through the British Business Bank’s 40+ accredited lenders and in the first instance, you should approach the relationship manager for your provider or consult their website for more information.
If the accredited lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
How we can help
If you have any queries in relation to the above issues and would like a confidential discussion with our team of specialists, please contact:
M: 07795 826008