Following recent Government announcements relating to the development of a loan scheme to support businesses through the current turmoil, today the Government has today formally announced that the Coronavirus Business Interruption Loan Scheme (CBILS) is now available through participating lenders.  We set out below our current (as of 23rd March 2020) understanding of the Scheme to try to assist you to understand what it might mean for your business.

This scheme is just one of a number of measures announced by Government and we would advise the reader to use the Government website below to monitor the full list of reliefs and grants available to the business owner at this time, which is being updated on a daily basis:

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

You can sign up for regular updates upon announcements on the link below:

https://www.gov.uk/email-signup?link=/government/topical-events/coronavirus-covid-19-uk-government-response

 

  1. What is the Coronavirus Business Interruption Loan Scheme (CBILS)?
  • CBILS is a new scheme that can provide facilities of up to £5m for smaller businesses across the UK who are experiencing lost or deferred revenues, leading to disruptions to their cash flow;
  • The scheme went live on Monday 23 March and will initially run for six months;
  • Government has confirmed that the amount of funding available under the scheme will be demand-led and is not capped;
  • CBILS supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance;
  • The scheme provides the lender with a government-backed guarantee potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’.
  • The borrower always remains 100% liable for the debt.

 

  1. Am I Eligible?
  • Smaller businesses (“SME”) from most sectors can apply for the full amount of the facility;
    • The following trades and organisations are not eligible to apply: Banks, Building Societies, Insurers and Reinsurers (but not insurance brokers); the public sector including state-funded primary and secondary schools; employer, professional, religious or political membership organisation or trade unions.
  • Be UK-based in its business activity;
  • Operate with an annual turnover of no more than £45m;
  • Viable Borrowing Proposal
    • You must show in your borrowing proposal 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; 

 

  1. So What Is Available? – Key Features 
  • Up to £5m facility
    • The maximum value of a facility provided under the scheme will be £5m, available on repayment terms of up to six years
  • 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
    • No fee for smaller businesses;
    • Lenders will pay a fee to access the scheme
  • Interest and fees paid by Government for 12 months
    • The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees;
    • So smaller businesses will benefit from no upfront costs and lower initial repayments;
      • Fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment
    • Finance terms
      • 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
    • Security
      • At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under;
      • For facilities above £250,000, the lender must establish a lack or absence of security prior to businesses using CBILS.
      • If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so

 

  1. How Can I Access The Scheme?
  • CBILS is available through the British Business Bank’s 40+ accredited lenders, which are listed on the British Business Bank website

https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/accredited-lenders/

  • In the first instance, businesses are advised that they should approach their own provider – ideally via the lender’s website.
    • We would also recommend you contact Jason Michelow (jasonm@barrons-bds.com) urgently so we can both note your intention and also assist you with the provision of our support
    • Decision-making on whether you are eligible for CBILS is fully delegated to the accredited CBILS lenders; if the accredited lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.

 

  1. What Do I Need To Do Now?
  • Try not to rush your assessment of what you need in terms of support;
    • The Scheme is available for at least the next 6 months and is not capped – you have time if your cashflow support;
    • And you will only get one immediate chance to assess what your business might need to sustain itself through the recession;
  • Think about taking advice to stress test your assumptions and projections;
  • We recommend you review our Business Planning and Short Term Funding Requirements notes included within our 18th March update.

Barrons has put together a helpful guide to running your business during the coronavirus crisis.