What is the Coronavirus Business Interruption Loan Scheme (CBILS)?

The Coronavirus Business Interruption Loan Scheme is a new scheme by the British government to provide financial support of up to £5 million in funding for small businesses across the UK who are struggling with lost or deferred revenues, leading to cash flow disruption.

CBILS can come in the form of various different finance products, including term loans, overdrafts, invoice finance and asset finance provided by a range of lenders. They will be available in the short to medium term, and will be managed by the British Business Bank.

Note: CBILS is just one of several actions announced by the British Government to support businesses. You can find more information about other available measures here.

Quick facts:

• Facility amounts: £1,000 to £5 Million
• Duration of finance: from 3 months to 6 years (term loans & asset finance)
• Duration for working capital facilities: up to 3 years
• Interest: interest-free for the first 12 months
• CBILS loans are limited to a maximum of 25% of 2019 turnover or 2 x annual wage bill – whichever is greater

Personal guarantees:

• For loans less than £250k – no personal guarantees
• For loans more than £250k – personal guarantees are at the lender discretion, but recoveries are limited to 20% of the outstanding balance after business assets have been realised. For example, for a £300K loan you would pay 20% of the amount over £250k. So 20% of £50k
• Principal private residences are excluded as a source of security

Who is eligible?

You are eligible for CBILS funding if:

• Your business is based in the UK
• You’ve been in business for at least a year
• Your 2019 annual turnover is up to £45M for UK-based activities
• You can demonstrate that your business was profitable prior to December 2019
• You must generate more than 50% of turnover from trading activity
• The loan must be used to primarily support your trading within the UK
• Any sector can apply, apart from:

– Banks, insurers, reinsurers (but not insurance brokers)

– Public-sector bodies

– Further-education (if grant funded)

– State-funded primary and secondary schools

Most lenders are rejecting applications from businesses that they would not have lent to prior to the Coronavirus outbreak, and businesses who were unprofitable in 2019 will not be accepted.

Key ways that accountants and bookkeepers can help their clients include:

• Ensuring cash flows and incomes for 2019 are accurate and reflect the strength of the business
• Providing a clear explanation for anything that reduced income or profitability in 2019
• Ensuring the CBILS application shows that the business can afford to repay under ‘normal’ trading circumstances

What should I consider before applying?

Banks will be looking for assurance that you have considered the following things before you apply for a Coronavirus Business Interruption Loan:

1. How much funding do you need? Apply for only the amount that your business needs to get through this crisis. You can figure that out with a cash flow forecast and scenario planning.
2. Have you cut as many costs as possible? For instance, have you renegotiated with suppliers? Can you defer rent?
3. What collateral do you have as available security? Is your borrowing proposal sound enough to be accepted?
4. Have you taken up all other relief on offer? These include:

• VAT deferment
• Time to Pay
• Coronavirus Job Retention Scheme
• Rates relief (sector specific)
• Grants (sector specific)

What do I need to do to apply?

You can apply to one of the accredited lenders with a lending proposal. The accredited lenders are both high street banks and smaller specialist lenders, such as invoice discounting and asset-based lending.

We’ve heard from multiple sources that you’re much more likely to be approved if you go through your existing bank. Some lenders seem to be rejecting applications from businesses that are not current customers in order to deal with the surge in demand. So the first step should be to approach your own bank, if they are accredited. If not, choose one of these lenders who has the type of finance you would like, and apply through their website.

Information you need to provide, according to many of the larger banks:

• 2019 year-end profit and loss statement
• 2019 year-end balance sheet
• Year-to-date balance sheet
• A cash flow forecast for between 12 weeks and 12 months, depending on the lender (you can generate one easily in Float)

You may also need:

• A business plan
• Details of your assets

You will need to self-certify that you have been adversely impacted by Coronavirus.

What happens if the lender accepts my application?

If your selected lender accepts your application, the finance will have a guaranteed interest-free period of 12 months, as the government will foot the bill for you. However, your business will remain liable for the borrowing at all times.

What if you already applied and were rejected?

If you already applied and had your application rejected, you may be able to apply again. Some eligibility criteria have been updated recently. For instance, insufficient security is no longer a condition for access to the scheme.

Lenders will also apply CBILS retrospectively to finance lent since 23 March where the business meets the eligibility criteria.

How long will my application take to be approved?

According to SME finance broker Rangewell, applications will take 4-6 weeks to be approved. Many banks are struggling to deal with the number of applications they are receiving because their teams are located in India, which is also in lockdown, meaning that approvals may take longer.

How can I create a cash flow forecast for CBILS?

You can easily create a cash flow forecast in Float if you use Xero, QuickBooks Online or FreeAgent as your accounting software.

Float is offering an extended free trial of its cash flow forecasting software until the 31st of May.

Alternatively, you’re welcome to use this basic 12 week cash flow forecast template provided by Pink Pig Financials.

What other government support is available?

• Businesses who employ staff can apply for the Coronavirus Job Retention Scheme and the statutory sick pay rebate
• Nursery businesses could get a business rates holiday for the 2020-21 tax year
• Retail, Hospitality and Leisure businesses could also get a business rates holiday, plus a cash grant of up to £25k per property
• Small businesses which occupy a property and receive small business rate relief, rural rate relief and tapered relief may be eligible for Small Business Grant Funding
• All business types may be eligible to defer VAT and tax payments
• Self-employed people can apply for a grant through the Self-employment Income Support Scheme, worth 80% of their profits up to a cap of £2,500 per month