What is it?
CBILS was introduced by the Government to aid those business who have experienced adverse financial affects from lost/deferred revenues as a result of COVID-19 and to assist with cashflow difficulties.
The scheme provides facilities of up to £5m for SMEs (small/medium businesses) on an up to 6 year repayment term. The scheme provides the lender with a Government backed guarantee for 80% of the facility (or outstanding balance, whichever is lower).
The Borrower remains liable for 100% of the facility (or outstanding balance, whichever is higher).
The Government will cover any lender fees but not any third party fees i.e. legal fees paid in relation to providing security. The first 12 months interest will also be paid by the Government. It is assumed that the Government will pay this directly to the bank via a Business Interruption Payment.
What is an SME for CBILS?
Any UK based business (or be an overseas company with a UK based activity) which an annual turnover of no more than £45m.
What are the facilities available?
- Term loans - 6 year repayment term
- Asset financing - 6 year repayment term
- Overdrafts - 3 year repayment term – not all lenders will offer this facility under the scheme (i.e. Barclays)
- Invoice financing - 3 year repayment term
The typical terms of the term loans will be:
- No early repayment charges/fees during the first 12 months;
- 6 capital month repayment holiday automatically given;
- 12 capital month repayment holiday available at lenders discretion;
- First 12 months interest paid by Government;
- Lenders fees are waived on all facilities (third party fees to be paid by Borrower)
- Variable interest rate from month 13 onwards;
How much can I borrow?
Each lender will have their own internal policy but the general agreement seems to be:
- 25% of the total turnover in 2019; or
- 2 x the annual wage bill for 2019 (or last year available); or
- Based on the cashflow requirements over the next 18 months.
It is not the lowest of the above but one of the above.
Do I need to provide any security?
This depends on the facility and borrowings. We have been advised that the following is an indication of what the lenders will require:
- Loans between £10k to £100k - short form guarantee (SFG) required
- Loans between £100k to £250k - require an SFG and debenture against the company
- Loans between £250k to £5m - require full personal guarantee (PG), debenture and tangible security where available i.e. property, assets etc
If the lender can offer the above facilities under normal commercial terms, then they will do so without needing to use CBILS. What this means practically is that if the lender can meet your requirements without having to use the scheme, then you will not benefit from the benefits of CBILS.
Do I need to meet any criteria?
As long as you have a proposal which is considered as commercially viable by the lender; and the lender believes that the finance will help you overcome your financial difficulties; and the lender believes that you will be able to meet the repayment terms.
The typical questions asked will be:
- What is the purpose of the facility? i.e. short term or long term
- How will the funds be used? i.e. paying staff wages, paying suppliers, purchasing stock etc
- How many employees are in the business?
- Will the business need any additional funding in the near future?
What information will I need to provide?
All the lenders will need the following as a matter of course:
- 2019 final/signed accounts or the latest accounts available;
- Up-to-date MI’s (management information) i.e. profit & loss, cashflows forecasts etc;
- A business plan which explains how the business is planning ahead.
Who are the lenders?
The lenders are comprised of the ‘high street bank’ (such as Lloyds/NatWest/Barclays etc) and numerous other ‘second tier’ lenders who may specialise in particular sectors or geographical areas.
A full list is available here - https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/accredited-lenders