Coronavirus Business Interruption Loan Scheme: FAQ

22 Apr 2020

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We have put together some questions and answers to help you to navigate the Coronavirus Business Interruption Loan Scheme.

 

What is CBILS?

CBILS is the Coronavirus Business Interruption Loan Scheme which, together with a range of other government initiatives, is designed to help SMEs mitigate the impact of the COVID-19 pandemic on their business.

Specifically, CBILS is designed to help businesses which are experiencing lost or deferred revenues, leading to disruptions to their cash flow. The scheme will initially run for six months.

Under CBILS, accredited banks will be able to provide loan financing under a wide range of products, including term loans, overdrafts, invoice finance and asset finance facilities. 80% of such loans are supported by a government guarantee, which acts as an incentive for participating banks to increase the amount of loan finance available to SMEs.

How will I know if my business is eligible for CBILS?

To be eligible for a facility under CBILS, your business must:

  • Be UK based in its business activity with annual turnover of no more than £45m;
  • Generate more than 50% of its turnover from trading activity;
  • Have a borrowing proposal which, were it not for the COVID-19 pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable your business to trade out of any short-to-medium term difficulty; and
  • If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.

How much will I be able to borrow under CBILS?

CBILS can provide facilities of up to a maximum of £5 million. It should be noted that borrowing the maximum of £5 million may be dependent on a number of factors including turnover, staff costs and the specific liquidity needs of a business.

Term loans and asset finance will be repayable over a period of up to six years. Overdrafts and invoice financing facilities will be made available for a period of up to three years.

Is CBILS available to businesses in all sectors?

The scheme is available for businesses in all sectors with the exception of the following trades and organisations:

  • Banks, building societies, insurers and reinsurers (but not insurance brokers);
  • The public sector including state funded primary and secondary schools; and
  • Employer, professional, religious or political membership organisation or trade unions.

Are sole traders/freelancers eligible?

Yes, as long as the business activity is operated through a business account. The scheme is open to sole traders, freelancers, body corporates, limited partnerships, limited liability partnerships or other legal entity carry out a business activity in the UK, subject to the conditions mentioned above.

Are businesses with private equity investment eligible?

If a business has private equity backing, it is eligible for CBILS, including situations where the investor holds a majority share. The business will be considered as being distinctly separate to both the private equity investor and its other portfolio investment companies when considering the £45m revenue threshold. The business will also be considered as standalone from its private equity investor when determining the £5m maximum loan value available under the scheme.

What costs will my business need to pay in order to access CBILS?

Arrangements fees may be charged by certain lenders; however, the government will cover the cost of this through making a Business Interruption Payment. The government will also cover the cost of all interest payments attached to the loan for the first 12 months. Interest will be charges under each bank’s normal terms.

It should be noted that businesses operating in fishery, aquaculture and agriculture sectors may not qualify for the full interest and fee payment from the government.

Are banks obliged to provide a loan to my business under CBILS?

No, you must be able to demonstrate that were it not for the COVID-19 pandemic, your business would be considered viable by the lender, and for which the lender believes the provision of finance will enable your business to trade out of any short to medium-term difficulty.

What information will I need in order to support my loan application under CBILS?

Each bank will have its own list of information that will be required. We consider that as a minimum you should have the following ready to be reviewed by the bank:

  • Annual statutory and management accounts for the previous two years;
  • Latest management accounts;
  • Budget prior to the Covid-19 pandemic
  • Revised forecasts for 18 months (including integrated cash flows) factoring in revised assumptions and mitigating actions being taken as a result of the Covid-19 pandemic.

Can I access CBILS through my bank?

Yes, if your bank is an accredited lender. The full list of accredited lenders can be found here.

If your bank is not currently an accredited lender, it might be the case that they are in the process of becoming accredited. You should ask your bank if this is the case, as your incumbent bank will be your best first port of call in gaining access to CBILS.

Will I need to provide personal guarantees or other security to get access to CBILS?

For loans of more than £250,000, CBILS requires the lender to establish a lack or absence of security prior to businesses using CBILS. This may include the bank looking at personal guarantees as a class of security, however a primary residential property cannot be taken as security under the scheme.

Different lenders are taking a different approach to personal guarantees, so we suggest you speak to your bank in the first instance to get more clarity.

I have had de minimis aid in the past, can I still get a loan?

Yes, as long as you meet the scheme’s eligibility criteria. Any previous de minimis state aid does not impact your eligibility for CBILS and does not need to be taken into account by the lender.

My business has a turnover of more than £45 million, meaning I will not qualify for CBILS. Is there any other way I can gain access to finance?

Companies with turnover greater than £45 million should consider the Covid Corporate Financing Facility (CCFF) as an alternative source of funding. The CCFF became operational from 23 March 2020. It is a joint scheme operated by HM Treasury and the Bank of England lending facility that is designed to support liquidity for larger firms, helping them to bridge COVID-19 related disruption to their cash flows through the purchase of short-term debt in the form of commercial paper (an unsecured, short term debt instrument issued by a company) on terms comparable to those prevailing in markets in the period before COVID-19.

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