How does the Coronavirus Business Interruption Loan Scheme (CBILS) help businesses?
The government revealed its Coronavirus Business Interruption Loan Scheme (CBILS) towards the end of March 2020. It is intended to help small and medium sized businesses in the UK to access loans of up to £5m, by offering security for 80 per cent of the value of these loans through the government-owned British Business Bank.
Am I eligible for the Coronavirus Business Interruption Loan Scheme?
If you answer yes to to the following, you could apply for a loan through the scheme.
- Does you business have less than £45 million turnover per annum?
- Is it UK-based?
- Do you have 3 full years of trading history?
- Does the majority of your turnover come from trading activity (i.e. not investments)
- Is the loan for business purposes?
The loans are backed by the government, up to 80 per cent, but the decision over whether to lend is with the commercial lenders who are taking part in the scheme.
Some 40 lenders will be offering the loans, including the four big banks, RBS, HSBC, Barclays and Lloyds.
What if I can’t afford the early costs of repayment ?
The government has realised that, for many smaller businesses, paying the first year’s repayment on a loan would be enough to put them off of applying at all, particularly in light of the lack of funds many businesses are faced with thanks to the lockdown. In order to go some way to solving this problem, they have pledged to pay the interest on the loans for the first 12 months, together with any fees the lender levies on the borrower initially.
Are businesses having problems accessing loans through the scheme?
Initially, yes, businesses are struggling to actually get loans through the scheme, it seems. The Business Secretary, Alok Sharma, claimed in early April 2020 that, some three weeks after the scheme had first been revealed, only 1.4 per cent of the businesses that had made enquiries about the loans had so far been successful in securing funding through the scheme. This percentage is believed to have moved up to 30-40 per cent by the end of April with the government having approved over 12,000 loans.
It seems that the problem may be that the money is slow in coming through, rather than that businesses are being turned down for the funding. The British Chamber of Commerce published a report on its weekly survey results in early April, which found that less than 1 per cent of businesses had received their loans, while only 7 per cent of smaller businesses had received grant money through the Small Business Grant Fund by that point.
In response to early criticism, Chancellor Sunak relaxed the criteria for businesses seeking funding under the CBILS and also passed laws banning banks from asking for personal guarantees from struggling business owners before being willing to lend through the scheme.
Certainly the process is not as simple and straightforward as the government is making out, not least because the requirements and eligibility criteria differ between the banks.
What can I use the loan for?
Eligible purposes are Short Term Working Capital; Starting up trading in the UK; Expanding an existing business within the UK; Buying a business (including goodwill) in the UK; Purchase of equipment; Purchase / lease of property; Developing a project; Additional Research and Development (business must carry out a commercial activity).
Can you help me apply for this loan?
Yes! Our team of accountants and financiers have already helped a number of businesses obtain CBILS loans.
We will be give you and independent appraisal on whether you are a viable candidate for the CBILS loan. If so, we’ll help you put a plan together that demonstrates the viability of your business before COVID-19. A integrated set of accounts, including a P&L, balance sheet and cashflow forecast will be put together to support your application.
As the approved lenders all have different criteria, we’ll determine which institution is your best fit. Let us guide you – please complete the form below and we shall be in touch very soon.