Tag Archives: CBILS

(COVID-19): The Business Interruption Loan Scheme (CBILS) – answers to your questions

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 cashflow. CBILS supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance facilities.

The scheme provides the lender with a government-backed guarantee potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’.

Please note: This scheme is just one of a number of measures announced by Government and you can find full details of the temporary, timely and targeted measures to support public services, people and businesses through this period of disruption caused by COVID-19 at: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

WHEN CAN I ACCESS THE SCHEME?

The scheme went live on Monday 23 March and will initially run for six months.

WHAT ARE THE KEY FEATURES of CBILS?

CBILS guarantees facilities up to a maximum of £5m available on repayment terms up to six years for term loans and asset finance. For overdrafts and invoice finance facilities, terms will be up to three years. The scheme provides the lender with a government-backed guarantee against the outstanding facility balance.

There is no guarantee fee for SMEs to access the scheme. The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees.[1] You (the SME) will therefore benefit from no upfront costs and lower initial repayments.[2]

At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under. The Big Four banks have agreed that personal guarantees will not be taken as security for lending below £250,000. For facilities above £250,000, the scheme requires the lender to establish a lack or absence of security prior to businesses using CBILS. Primary Residential Property cannot be taken as security under the scheme. If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.

Please note: It’s important that you are aware that you, the borrower will always remain 100% liable for the debt. The CBILS guarantee is to the lender, not you, the SME.

HOW DO I KNOW WHETHER I’M ELIGIBLE TO APPLY?

Smaller businesses (SMEs) from all sectors[3] can apply for the full amount of the facility, up to a maximum of £5m.

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
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
If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
One of the eligibility criteria is for the business to have an annual turnover of no more than £45m. Would the £45m turnover threshold be measured on the entirety of the Group or could the funding be taken by a single operating subsidiary? Can the different companies within the group access their “own” guarantee?

If your business is part of a group, controlled on either a legal or de facto basis, the maximum turnover applies to the group undertaking. More than one company within the group can be considered for a CBILS facility but only if the consolidated group turnover does not exceed the £45m annual turnover threshold. The qualifying period is 12 months preceding application.

WHAT IS THE DEFINITION of an SME for the CBIL SCHEME?

Under the CIBL Scheme, the definition of SME is confined to the turnover of an Applicant (or an Applicant’s group) which must not to exceed £45m. The Borrower cannot be an individual other than where the individual is a sole trader or a partner in a partnership and is acting in a business capacity.

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 here.

In the first instance, businesses should approach their own provider – ideally via the lender’s website. They may also consider approaching other lenders if they are unable to access the finance they need.

Decision-making on whether you are eligible for CBILS is fully delegated to the 40+ accredited CBILS lenders. These lenders range from high-street banks, to challenger banks, asset-based lenders and smaller specialist local lenders.

Note: if the accredited lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.

Additional application notes:

Given there is likely to be a big demand for facilities once the scheme goes live, we ask you to please:

Consider applying via the lender’s website in the first instance. Telephone lines are likely to be busy and branches may have limited capacity to handle enquiries due to social distancing
Consider the urgency of your need – it is possible that some businesses may be looking for regular longer-term finance rather than ‘emergency’ finance, and there may other businesses with a more urgent need to speak with a lender
What are the fees to borrow under CBILS?

There is no guarantee fee for SMEs to use the CBILS scheme.

WHAT TYPES OF FINANCE ARE AVAILABLE and WHO OFFERS WHICH TYPE?

CBILS supports a wide range of business finance facilities, including:

Term loans
Overdrafts
Asset finance
Invoice finance
Note: Not every lender can provide every type of finance listed.

CBILS is available through the British Business Bank’s 40+ accredited lenders, which are listed on the British Business Bank website here.

WHAT TYPES OF BUSINESSES is CBILS FOR?

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.

IS THE SCHEME APPROPRIATE FOR Start-ups?

Potentially, 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.

Visit www.startuploans.co.uk for more information.

WILL I NEED SECURITY TO GET a CBILS-backed LOAN?

At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under. The Big Four banks have agreed that personal guarantees will not be taken as security for lending below £250,000. For facilities above £250,000, the scheme requires the lender to establish a lack or absence of security prior to businesses using CBILS. Primary Residential Property (PPR) cannot be taken as security under the scheme.

Note: If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.

Do I NEED EVIDENCE THAT I HAVE A VIABLE BUSINESS?

Yes. 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.

I HAVE AN EXISTING EFG Facility WITH MY LENDER THAT I NEED TO DISCUSS. What do I do?

If you have a query about an active EFG facility, you should approach your current provider – ideally via their website, and not the British Business Bank.

ARE THERE ANY RESTRICTIONS ON A BORROWER REFINANCING their EFG Facility to a CBILS Facility?

If you have a query about an active EFG facility, you should approach your own provider – ideally via their website – and not the British Business Bank. Any request for re-financing an existing EFG facility will be at each individual Lender’s discretion, be subject to certain limits, and you meeting the CBILS eligibility criteria.

WHAT’S HAPPENING TO THE OLD Enterprise Finance Guarantee Scheme (EFG)?

The EFG scheme is temporarily suspended at this point in time. If you wish to apply for a financing facility, your lender will be able to assess if you are eligible under CBILS.

HOW LONG WILL CBILS run for?

CBILS will initially run for 6 months.

WILL THE CBILS funds run out SO I CAN’T ACCESS THE SCHEME?

No. Government has confirmed that the amount of funding available under the scheme will be demand-led. Therefore there is no immediate need to approach a lender if you do not need finance in the short-term. The scheme will initially run for six months.

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 United Kingdom, with annual turnover of up to £45m, operating in all sectors[4].

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

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. CBILS operates as a notified scheme rather than under de minimis as EFG did. There is no interaction between any de minimis state aid previously received by a business and the size of the CBILS facility they can access, should they be eligible.

I AM GETTING OTHER KIND OF AID TO HELP RESPOND to COVID-19 – CAN I STILL GET A LOAN?

Yes. The eligibility criteria for CBILS does not require Lenders to take into account the other forms of government support that SMEs may be benefiting from e.g. business rate reliefs or grants unrelated to the CBIL scheme.

HOW is CBILS DIFFERENT FROM the EFG SCHEME?

CBILS is a new scheme. It is different from EFG in a number of ways.

* There is no guarantee fee for SMEs to use CBILS. Under EFG, there was a guarantee fee paid by the borrower.
* The Government will make a Business Interruption Payment to cover the interest and any lender-levied fees in the first 12 months of any CBILS facility, so smaller businesses will benefit from no upfront costs and lower initial repayments (originally announced as 6 months). Following earlier discussions with the banking industry, some lenders indicated that they would not charge arrangement fees or early repayment charges to SMEs borrowing under the scheme. HM Government greatly appreciates this approach by lenders.
* The maximum facility provided under CBILS will be up to £5m. Under EFG, this was £1.2m
* At the discretion of the lender the need for security may be waived for facilities below £250,000. * The Big Four banks have agreed personal guarantees will not be taken as security for lending below £250,000. For facilities above £250,000, the scheme requires the lender to establish a lack or absence of collateral prior to businesses using the CBIL Scheme. Primary Residential Property (PPR) cannot be taken as security under the scheme.
* CBILS is for borrowing proposals which, were it not for the current COVID-19 pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty. The EFG scheme was only for facilities considered viable under the lender’s commercial terms.
* CBILS is available to businesses with annual turnover of no more than £45m. EFG was available to businesses with annual turnover of no more than £41m.

If you have any further questions please contact your current provider, not the British Business Bank.

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[1] Following earlier discussions with the banking industry, some lenders indicated that they would not charge arrangement fees or early repayment charges to SMEs borrowing under the scheme. HM Government greatly appreciates this approach by lenders.

[2] Fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment.

[3] 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.

[4] 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.