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Coronavirus Business Interruption Loan Scheme

The temporary Coronavirus Business Interruption Loan Scheme (CBILS) supports SMEs (Small and Medium Enterprises) with access to loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to 6 years.

The government will also make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.

The government will provide lenders with a guarantee of 80% on each loan (subject to pre-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The scheme will be delivered through commercial lenders, backed by the government-owned British Business Bank.

In recent days CBILS has been significantly expanded along with changes to the scheme’s features and eligibility criteria to encourage lenders to offer the scheme to those who need it. The changes mean even more smaller businesses across the UK who have been affected by the Coronavirus crisis can access the funding they need.

Importantly, access to the scheme has now been opened up to those smaller businesses who would have previously met the requirements for a commercial facility but would not have been eligible for CBILS. Now Insufficient security is no longer a condition to access the scheme. This should have a significant effect for those wishing to borrow to keep their business viable for when this is all over.

This significantly increases the number of businesses eligible for the scheme. The expanded scheme will be operational with lenders from Monday 6 April 2020.

British Business Bank operates CBILS via its accredited lenders of which there are over 40 including the high street banks. 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 but the borrower remains fully liable for the debt.

Newly announced, and to encourage more lending under the scheme, personal guarantees of any form will not be taken for facilities below £250,000.

Now may be a good time for businesses in need of additional finance to help them through this difficult period, or in readiness for when this is all over to contact their bank and discuss the options available to them.

So, if your business needs finance what do you need to consider?

Who makes the decision to lend?

The lender has the authority to decide whether to offer you finance and so contacting your own bank in the first instance will enable you to talk to someone who already knows something about your business already. If your bank turns you down you can still approach other lenders within the scheme.

Who is eligible?

Your business must:

  • Be UK-based in its business activity with an annual turnover of no more than £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 adversely impacted by the coronavirus (COVID-19).

What lenders will need from you?

When you apply for a business loan, most lenders will ask you for the following:

  • The amount you would like to borrow
  • What the money is for
  • The period over which you will make the repayments

You will need to provide certain evidence to show that you can afford to repay the loan. This is likely to include:

  • Management accounts
  • Cash flow forecast
  • Business plan
  • Historic accounts
  • Details of assets

The above requirements will vary from lender to lender. If you do not have everything listed here, 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.

Southgates are experienced and well positioned to support our clients, old and new, in putting together a solid business plan to help support any application. If you need our expert help and support please contact us on 01964 614426. Together we can get through this.

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