CBILS may well be worth a look at before applications close on 30 November 2020

Coronavirus Business Interruption Loan Scheme (CBILS)
 With Covid-19 infection rates increasing across Europe including the UK, the outlook of a full return to normality is still unclear with various parts of the country being partially locked down again.
 
This will have further impact on business and consumer confidence.
 
You may, therefore, wish to consider obtaining further financial assistance through CBILS.

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

Applications must be submitted by 30 November 2020 and lenders have until a later date to process applications.

CBILS has been significantly expanded along with changes to the scheme’s features and eligibility criteria. The changes mean even more smaller businesses across the UK impacted by the coronavirus crisis can access the funding they need.
Importantly, access to the scheme has been opened up with insufficient security no longer a condition to access the scheme.

This significantly increases the number of businesses eligible for the scheme.

In addition to providing additional working capital, CBILS loans are also allowed for business looking to grow or expand their operations which may of course include the ability to fund diversification in to new business areas to lessen the overall impact of Covid-19.

How much will it cost?
There are no costs to set up, a repayment holiday for year one and interest charges for year one are covered by the government.
Lenders will risk access each individual case and quote the interest rate that they will charge based upon the business case and the length of time required to repay the CBILS.

What if I already ready Business Bounce Back loan (BBL)?
You can still apply for a CBILS but the CBILS loan will be reduced by the amount of the BBL or alternatively you can cancel the BBL and have the full CBILS offered.
We would, however, not recommend that anyone does this as the guaranteed loan interest rate is 2.5% and you have up to 6 years to repay the loan including the yar one repayment holiday.
 
How it works
The scheme is administered through the British Business Bank operates CBILS via its accredited lenders. There are over 90 of these lenders currently working to provide finance. They include:

• high-street banks
• challenger banks
• asset-based lenders
• smaller specialist local lenders

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

• term loans
• overdrafts
• invoice finance
• asset finance

 
CBILS gives the lender a government-backed guarantee for the loan repayments to encourage more lending.
 
 However, whilst the borrower remains fully liable for the debt, under the scheme:

1.  personal guarantees of any form will not be taken for facilities below £250,000.
2. for facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but: 
3. 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; and
4. a Principal Private Residence (PPR) cannot be taken as security to support a personal guarantee or as security for a CBILS-backed facility 

The above security rules are helpful for business owners operating through limited companies, as it basically caps their personal risk if their company were unable to repay the loan. This is however, not the case for business owners operating as sole traders or through partnerships.

Applications
The initial application must be completed by midnight on 30 November 2020. 

Lenders have made this a relatively straight forward on-line process and then have until a further date months to process the application.

We are currently talking to clients who we think may benefit from CBILS but please feel free to contact us to discuss how the scheme works and it it could benefit your business.

Please don’t hesitate to contact haleys for more information.

Tim Haley

Tim.haley@haleysba.co.uk

07990 512747