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SUmmary of what we know so far...

Why were they set up?

The Coronavirus Business Interruption Loan Scheme (CBILS) provides emergency financial support to smaller businesses (SMEs) across the UK who are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak.

The scheme is a part of a wider package of government support for UK businesses and employees.

The scheme provides the lender with a government-backed guarantee potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’. However, insufficient security is no longer a condition for accessing the scheme, meaning those with available assets can still apply.

Access to the scheme has now been opened to smaller businesses facing cashflow difficulties who previously would not have been eligible for CBILS because they met the requirements for a standard commercial facility.

How does it work?

These are being offered by accredited lenders liked to the British Business Bank. There are over 40 of these lenders currently working to provide finance, this includes the major high street banks. However, not all the lenders have joined the scheme yet and many of the major banks are only considering applications from their customers, so you should start with your own bank first.

A lender can provide up to £5 million in the form of:

  • term loans
  • overdrafts
  • invoice finance
  • asset finance

Under the scheme, the government has agreed to give a guarantee for 80% of the amount borrowed, however, the business will remain liable for 100% of the debt. These debts can be paid off over up to 6 years and the government will pay all interest and fees for the first 12 months.

The borrower remains fully liable for the debt.

The lender has the authority to decide whether to offer you finance.

Who can apply?

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 be considered viable, were it not for the COVID-19 pandemic.
  • The finance will enable the business to trade out of any short-term to medium-term difficulty.

Things to consider

You must 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 difficult. 

For example, you can afford the repayments.

Under the scheme, lenders will not take personal guarantees of any form for facilities below £250,000.

For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but they exclude the Principal Private Residence (PPR), and recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied

Are sole traders / freelancers eligible?

Yes, if 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 United Kingdom, with an annual turnover of up to £45m.

The business must generate more than 50% of its turnover from trading activity.  

Is the scheme appropriate for Start-ups?

Possibly, if your business activity is primarily UK-based. For early-stage businesses in their first two years of trading, the British Business Bank’s Start-Up Loans programme (loans £500 to £25,000 at 6% p.a. interest) may be more suitable.

What will you need to provide?

The requirements vary from lender to lender and you should check the requirements of your ask and speak to your Relationship Manager, however, in general, the lenders will require the following:

  • Two years of annual accounts;
  • Your most up to date management accounts from your year-end to the end of February, if you have them;
  • Business as usual forecast showing that the business was viable but for the effects of the CV19 crisis, probably 12 months;
  • A 12-month forecast showing the worst-case scenario showing the impact of the CV19 pandemic on your business – depending on your industry, probably showing 3 months lockdown, 3 months disruption and then returning to normal, detailing your assumptions which must be reasonable;
  • The amount you want to borrow and details of what you intend to use the money for. As it is likely the bank will review this on a line by line basis;
  • Applications must be made for each individual business that wishes to participate in the scheme, although the bank may take into consideration any other assets in other group entities for security purposes.

If you want to apply?

The banks are accepting applications directly, you should speak to your relationship manager directly if you have one, if not most participating lenders have special CBILs pages set up and dedicated email support. There is a high volume of applications so there can be up to 10 working days delay.  

You can apply directly to your bank and if you need copies of your annual accounts which we produce, we will provide them to you, please speak to your engagement partner.

How can Hentons help?

If you do not feel comfortable making this application yourself and you would like us to do these on your behalf, we have a team ready to produce you an application pack with all the relevant forecasts and supporting documents.  

This is a fully managed service, aiming to make the process as straightforward as possible. We will start by having a chat with you to discuss your requirements and agree on a flexible fee. Once engaged, we will work with all the key stakeholders to build your application, we will draft any application forms and submit to the bank. We will also keep track of the application and keep you updated on its progress. Initial applications will be made to your own bank and if appropriate we will consider a further application to an alternative lender.

If you are interested in this service and would like a chat, please contact Tim Baum-Dixon who is leading our Crisis Management Team.