Announced by the Chancellor at Budget 2020, the Coronavirus Business Interruption Loan Scheme (CBILS) is now open for applications. The loan scheme 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. It is delivered by the British Business Bank, through 40+ accredited lenders and partners.

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’.

Here are some FAQ’s to help you:

Eligibility

All small businesses can apply. 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.

How do I access the scheme?

Firstly you should approach your own provider (ideally via their website! Telephone lines are likely to be busy and branches may have limited capacity to handle enquiries due to social distancing). If they are unable to access the finance they may consider approaching other lenders for you.

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.

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. Lenders will pay a fee to access the 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.

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. However, for facilities above £250,000, it 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.

Do I need to 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.

How long will CBILS run for?

CBILS will initially run for six 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, 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. The business must generate more than 50% of its turnover from trading activity.

I am getting other kinds 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.

If you have further questions your first point of call should be your provider but if we can help in any way please do let us know.