Coronavirus Business Interruption Loan Scheme (CBILS)

The scheme will help small and medium sized businesses to access loans and other kinds of finance up to £5 million. This scheme is delivered by the British Business Bank. The government is providing a guarantee of 80% on each loan and with no interest due for the first twelve months.

The scheme is open until 31 March 2021.

What Are The Key Features of CBILS?

CBILS guarantees facilities up to £5 million, available on repayment up to 6 years and an extension up to a maximum of 10 years for existing CBILS (for term loans and asset finance) and up to 3 years (for overdrafts and invoice finance facilities).

The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender fees. You will benefit from no upfront costs and lower initial payments (fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment)

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

For facilities above £250,000, personal guarantees may be required, at the lender’s discretion, but:

• They exclude the Principal Private Residence (PPR)
• Recoveries under these are capped at maximum of 20% of the outstanding balance of the CBILS facility
  

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

• Term Loans
• Overdrafts
• Asset Finance
• Invoice Finance

Am I eligible?

Smaller businesses from all sectors can apply for the full amount of the facility, up to a maximum of £5 million. To be eligible under CBILS, your business must meet the eligibility criteria:

• Is based in the UK;
• Has an annual turnover of up to £45 million;
• Have a borrowing proposal which the lender would consider viable, were it not for the current pandemic;
• Self-certify that it has been impacted by COVID-19; and
• Not to be classed as a business or ‘undertaking’ in difficulty

The criteria has been made more accessible for smaller businesses so if you were previously ineligible for CBILS due to the requirements, it may be worth re-contacting your lender.

If you are looking to borrow more than £30,000 or more, you will need to confirm that your business wasn’t classed as a business in difficulty on 31 December 2019. A link to British Business Bank’s eligibility checklist can be found here.

Who cannot apply:

• Banks, insurers and reinsurers (but not insurance brokers)
• Public-sector bodies
• State-funded primary and secondary schools

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What do I need to do to access it?

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CBILS is available through most lenders, the accredited lenders can be found here. The choice is fully delegated to the accredited CBILS lenders. Applications can be done online.

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What Supporting Documents Might I Need To Apply?

The documents needed will differ from lender to lender, but we often see and can help with:

• Management Accounts
• Business Plans
• Historic Accounts
• Details of Business Assets

Even if you do not have the above documents, it is still worth applying as a CBILS loan could still be an option to provide finance to support your business. For many customers approaching their existing lenders for a smaller facility, the process may be automated and therefore may not require the same level of documentation.

If one lenders turns you down, you can apply to other lenders in the scheme.

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Who do I need to speak to?

You should speak to your business banking provider or one of the accredited lenders. With high demand for CBILS facilities, finance providers recommend that you approach a lender via their website. Phone lines are likely to be busy and branches may not be able to handle enquiries in person.

This article was written by Saint Financial Group, a multidisciplinary group based in the UK that helps small businesses develop and grow. SaintFG offers a range of quality solutions in supporting businesses. If you need another further guidance or would like to know how we can work with you, get in touch today!

FAQS

1. Do I need to provide evidence that I have a viable business?

Yes. You must show in your borrowing proposal that were it not for the current pandemic, the lender would consider your business viable. You must also self-certify that your business has been impacted by the coronavirus outbreak.

2. Is a CBILS facility available to existing customers of participating lenders or can an SME that is not an existing customer still apply?

CBILS is open to all eligible borrowers – your business does not need to be an existing customer of the lender you are approaching.

3. Can CBILS be used to refinance an existing commercial facility?

You can, in certain circumstances, use a CBILS facility to refinance existing debt. For example, where you are seeking to put your business on a more stable financial footing and/or improve your working capital position, then, in principle, a CBILS facility could be provided, providing you fulfil the eligibility criteria for the Scheme.

Refinancing can be undertaken with or without an increase in the original borrowing. Any refinancing will be treated as a new facility and the application will need to meet the eligibility criteria for a CBILS facility.

4. What types of businesses is CBILS for?

CBILS is designed to support a wide range of smaller businesses (i.e. with an annual turnover of less than £45 million) across the UK who have been impacted by the Coronavirus crisis.

5. What is the definition of an SME for CBILS?

Under CBILS, the definition of SME is confined to the turnover of an applicant (or an applicant’s group), which must not exceed £45 million. 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.

6. What is “turnover” for the purpose of checking eligibility for CBILS?

If it is a sole enterprise it is the turnover of the applicant only, as shown in the latest set of accounts. For applicants acting as part of a group, that have partners or linked enterprises, the turnover assessment should take the latest turnover of the applicant, as shown in their accounts, together with the turnover of any linked enterprises, any partners of any linked enterprises, any enterprises linked to any of the applicant’s partners and any enterprise linked to the applicant’s linked companies.

7. Are sole traders/freelancers eligible?
Provided that they satisfy the other eligibility criteria for the Scheme, CBILS is open to:

• sole traders
• freelancers
• bodies corporate
• limited partnerships
• limited liability partnerships, and
• any other legal entity carrying out business activity in the UK with:
• an annual turnover up to £45 million, and
• business activity operating through a business account operating in any eligible sector

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

8. Does CBILS require that all eligible companies generate a certain percentage of annual turnover from trading activities?

Yes, an eligible SME must generate more than 50% of its income from trading – the sale of goods or services. CBILS is not designed to support shell companies. Registered charities and further education establishments are exempt from this requirement.

9. 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 from £500 to £25,000 at interest of 6% per annum) may be more suitable.

10. Can companies that have received support from the Enterprise Investment Scheme (EIS) apply for CBILS?

Companies that have received funding through EIS are in principle eligible for support from CBILS, provided that they satisfy the other eligibility criteria of the Scheme.

11. Is an SME based overseas eligible?

An SME which is foreign-owned is in principle eligible to apply for CBILS, provided it is trading in the UK (not just selling into the UK and has the core of its business operations in the UK) and uses the CBILS facility to support its business activity in the UK. The same is true for an SME which has UK ownership but is registered abroad.

12. Is a company that derives income from property eligible for CBILS?

If it derives more than 50% of its income from commercial activity that generates turnover, whether or not this is with the intention of making a profit. This includes real-estate SMEs that derive income from property (including real-estate investment companies and housebuilders).

CBILS, provided that they satisfy the other eligibility criteria of the Scheme.

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