Coronavirus Business Interruption Loan Scheme (CBILS) - Reality bites

The temporary Coronavirus Business Interruption Loan Scheme supports small and medium-sized businesses with access to loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to six 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. NB- the borrower always remains 100% liable for the debt. The full details are available here.

The devil is in the detail though.

Most lenders are offering CBILS only if the business does not meet the lending criteria for the normal financing products available. If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so. Where the small business has a sound borrowing proposal but insufficient security, the lender will consider the business for support via the scheme.

Lenders also assess whether businesses are viable, meaning that banks will turn down loss-making businesses.

Be prepared to provide detailed information on the funding requirement. This will include information on

  • How the Coronavirus has impacted the business,
  • What steps has the business owner taken to mitigate the impact whether through reducing costs or exploring other channels of income,
  • How much you are looking to borrow and the assumptions used to come to this figure,
  • How will the business service the additional debt in addition to its existing commitments.

Expect to be requested for financial information in the form of

  • Cashflow forecast,
  • Previous years’ accounts- typically for the previous 3 accounting years,
  • A list of creditors and debtors in the business,
  • Up to date Management Accounts.

Personal guarantees from the business owners are also required by most lenders.

If you think that your business will require CBILS

  • Talk to your bank about what they can do for you (be prepared for a long wait though, the banks are overwhelmed with calls).
  • Consider if CBILS is suitable for your business, or other financing facilities might be more beneficial.
  • Compare the CBILS offers against traditional loans. Often the terms and interest rates on traditional loans are more attractive.

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