The Coronavirus Business Interruption Loan Scheme (CBILS) provides financial support to businesses across the UK that are losing revenue and seeing cashflow disrupted because of the COVID-19 outbreak.
One of the questions I have is whether the scheme provides enough support for businesses facing huge challenges, the likes of which we have never encountered before?
It’s important to remember that if you do take out a loan, this additional debt will need to be repaid and, with this in mind, you should explore all the other Government support that will ease any cashflow challenges before making a CBILS application including:
- VAT deferment
- Time to pay arrangements (TTP)
- Job retention scheme (JRS)
- Renegotiating with suppliers
- Cutting other costs, and
- Depending on the sector you operate in, any business rates relief
The scheme’s features
- The Government will cover the first 12 months of interest payments and any lender levied fees
- The borrower remains liable for repayments of the capital in those first 12 months – although some lenders are also offering capital repayment holidays during the first 12 months from drawdown
- The scheme is government backed which can mean an increased likelihood of lenders saying yes
- For lending under £250k, no personal guarantee is required
- For lending above £250k, personal guarantees may be required but this will exclude the principal private residence
- Products available include:
- Term facilities,
- Invoice finance facilities, and
- Asset finance facilities.
The Chancellor announced these updates to the scheme last week:
- Lenders were previously offering regular commercial loan facilities to any business with adequate security, in lieu of offering CBILS. This has changed and now all lenders are looking at all applications as CBILS in the first instance.
- Previously, only companies with turnover of less than £45m were considered for CBILS, this threshold has changed to include companies with turnover of less than £500m.
- The previous cap of £5m of lending has now increased to £25m of lending.
Any business applying to the CBILS needs to be commercially viable and, until the Government provides further clarification, it’s difficult to know exactly what they mean by this. For example, if a business is loss making, does that automatically mean it is not viable?
Affordability is also important, so preparing forecasts is essential because once you’ve dealt with the cashflow hurdle, you’ll need to demonstrate an ability to repay the loan and a profitable future.
To help you prepare for any CBILS application, we’ve pulled together details about the information that is likely to be required, together with some key questions that we know are being asked by lenders. If you are unsuccessful with your own bank, we might be able to help you further, having partnered with Capitalise who have access to over 100 lenders and can assist with any finance applications.
Only time will tell whether the support currently being offered is enough, but there’s no doubt that the measures we’ve seen the Government introduce so far, and in such a short space of time, are truly remarkable and for that they deserve a huge amount of credit.
If you need any support considering the best options for your business or making applications for finance, please get in touch with your usual Sagars contact or Paul Lodder.