As we begin to understand the new terms arising from the COVID-19 outbreak such as “self-isolate” and “furlough”, and the business world adjusts to meeting using “ZOOM” or “Teams”, we now have to consider whether a Coronavirus Business Interruption Loan –“CBIL” is the right facility to help a business survive the pandemic. Our Managing Director, Ian Rodd explains more.
As of today we still can’t tell you when the 80% from the employee retention scheme will be paid to you, but it is important that you undertake the steps to obtain the most from this and any other grants from the local authority, particularly if your business is in the hospitality, leisure or retail sectors. The reason being that if you apply for a -“CBIL”, the process will soon grind to a halt if you haven’t considered all other actions.
The Government has expanded the scheme to enable many more small trading businesses with annual turnover less than £45M, to be eligible for a CBIL with 40 accredited lenders able to lend up to £5M per application. Of course this particular funding stream has to be in association with the negative effects of the virus and the business income or cash-flow must have been adversely affected as a direct result of having to close down or severely restrict operations.
CBILS gives the lender a government-backed guarantee for the loan repayments to encourage more lending and this means that the lender has the authority to decide whether to offer you finance. Last Wednesday, following criticism of access to the scheme, Alok Sharma, the business secretary said that it was “completely unacceptable” if banks were unfairly “refusing funds to good businesses in financial difficulties”. However the scheme is now available to smaller businesses facing cash-flow difficulties who previously would not have been eligible for CBILS because they couldn’t meet the requirements for a standard commercial facility.
The main change today, is that businesses who would normally have insufficient security can apply. The requirements now state that lenders will not take personal guarantees of any form for facilities below £250,000 but for facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but this security has to exclude homes. If the business subsequently fails, the debt recovery is capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied.
You can read more about the Coronavirus Business Interruption Loan Scheme on the Ward Goodman Hub
There are however options to borrow the money in different ways to taking out a loan under the scheme, for example invoice finance, asset finance overdrafts. The loans and asset finance arrangements can be arranged for up to 6 years with overdrafts and invoice discounting being 3 year agreements. The application asks for background information on the business and still asks for what many will consider to be extensive financial information, which for some, will be difficult to obtain.
We strongly advise that you look at the checklist for the information requirements if you are considering additional finance and then discuss your needs with us to help you work out the best way to approach your bank. Click for Checklist