Coronavirus Business Interruption Loan Scheme (CBILS)

The Coronavirus Business Interruption Loan Scheme (CBILS) makes available loans of up to £5m for businesses with a turnover of £45m or less. To incentivise lenders, the Government will guarantee up to 80% of the value, there will be no loan charges and the first twelve months will be interest free, with the Government footing the interest bill.

The financial products on offer include: term facilities, overdrafts, invoice finance facilities and asset finance facilities.

There are more than 100 accredited lenders including high street banks, challenger banks, asset-based lenders and smaller specialist local lenders. The full list can be found here.

To find out if you are eligible and how Smith & Williamson can help you, please navigate the checklist provided below.

Accessing funds via CBILS has become easier but here are our tips for giving yourself the best chance.

We have been talking to lenders and companies alike about accessing the CBILS funding. Based on these discussions, it’s clear that the challenges for lenders in first processing the sheer number of applications and then deciding if they should lend (they are also at risk) has eased and a significant number of applicants have benefitted from the scheme. Eligible companies will need to understand the basis of the scheme in full and also be well-prepared, making it easy for lenders to approve their application:

• Healthy underlying business - CBILS is designed to bridge short to medium-term financing requirements resulting from downturn in trading due to COVID-19, not to support businesses that were already in distress. Businesses must self-certify that they have been adversely impacted by the coronavirus and applicants must demonstrate the strength of the underlying business. Lenders will also consider the strength of the management team when assessing the underlying business.
• Security – while CBILS is providing government-backed loans, lenders will still seek the maximum available security from the borrower. The guarantee is to the lender and not the applicant and so borrowers should remember that they are liable for the full amount of the loan. Primary Residential Property (PRP) cannot be taken as security, but lenders may look to other assets for security and may seek Personal Guarantees (PGs) from business owners (e.g. savings, shares and personal property). Changes to the scheme since its inception mean that no PGs will be requested for facilities under £250,000 and insufficient security is no longer a condition to access the scheme. Facilities over this amount may still be subject to PGs however recoveries under these are capped at 20% of the outstanding balance after the proceeds of business assets have been applied. Asking business owners to take on increased risk through PGs in these uncertain times is controversial and may deter business owners. It is also worth noting, that where an applicant is a group, the lenders are seeking a cross guarantee. As of September 2020, the government intends to allow CBILS lenders to extend the term of a loan from six to ten years.
• Timing – businesses should act now where there is a pressing cash flow requirement or where cash flow management is absorbing too much key management time and therefore detracting from leadership of the business during these difficult times. The Government has confirmed that funding under CBILS will be demand-led (i.e. available funds will not ‘run out’) and the scheme will remain open for applications until 30 November 2020.
• Speak to your current bank first – most of the mainstream banks have continued to prioritise existing customers ahead of new applications. If you are unable to access finance through your current banker, there are over 100 accredited providers of CBILS (ranging from high street banks to challenger banks, alternative finance providers and specialist or regional funders). Each may have a different risk profile, or more capacity to take on new opportunities. More providers are being approved each day.
• Applying to lenders – a well-prepared funding proposal is more likely to elicit a positive (and perhaps speedier) outcome. Based on our discussions with finance providers, we recommend including the following information in a CBILS application:

- Published (audited where applicable) accounts – ideally, for the last three years
- Latest management accounts
- 12 months cash flow projections, demonstrating the impact of the virus, a period of recovery and return to normal trading (including commentary on key risks and assumptions therein).
- 12 months ‘business as usual’ cash flow projections
- Description of the impact of coronavirus on the business and measures taken to mitigate against deferred/lost revenue
- Description of other government relief taken to demonstrate that this has been maximised
- Details of available security

Whilst the scheme funding under the scheme is interest free for the first year, applicants should consider if the interest rate they are offered is an acceptable and viable rate once the business becomes liable for interest repayments after 12 months.

S&W’s team can support you in several areas including:

• Cash flow modelling – as experienced financial modellers, we can assist you with model preparation or refinement of your existing model in order to generate a fit-for-purpose integrated cash flow model.
• Assistance with applications – we understand the information that is key to funders when assessing the risk of a funding proposal. We can support you by identifying and collating the necessary information and drawing out the key messages to best position the business’s application (while clearly identifying key risks).
• Debt Advisory – discussing and challenging your funding strategy, working with you to agree the best terms, identifying alternative providers if required and project management of the transaction.