The Coronavirus Business Interruption Loan Scheme (CBILS) has played an essential role in supporting businesses through the pandemic, providing billions of pounds of funding to businesses.
However, the CBILS is now due to end on 31 March 2021, after which no further applications for the scheme can be made. The replacement Recovery Loan scheme looks like it will be a less attractive options so we encourage you to think about your options now.
Administered through the British Business Bank and its group of accredited lenders, the CBILS allows businesses to apply for a loan of between £50,001 and £5 million up to 25 per cent of their annual turnover.
Guaranteed by the Government to improve access to businesses facing financial difficulties, the loan is free of interest for the first 12 months, is not subject to upfront fees and businesses don’t need to make repayments in the first 12 months. Loans up to £250,000 are not subject to a personal guarantee.
To be eligible, businesses must meet the following criteria:
- Be UK-based in its business activity;
- Have 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 the business has been impacted by the Coronavirus (COVID-19) pandemic; and
- Not be classed as a business or ‘undertaking’ in difficulty.
You will need to provide certain documents when you apply for a CBILS-backed facility. These requirements vary from lender to lender, but are likely to include:
- Loan amount, purpose, and term
- A short paragraph on the business background and how it has been impacted by Covid-19
- Last two full sets of filed accounts
- Bank statements covering November 2019-present
- Shareholder and directors’ details
- Up to date management accounts
- Current debt position of existing loans and borrowing.
To apply for finance via the CBILS, borrowers need to have started an application by the end of the day on 31st March 2021.
You may have thought that the CBILS only provided ‘standard’ term loans but there are a variety of products available under the scheme, some secured on invoices, some against property and some completely unsecured.
If you haven’t benefited from the scheme, but think that this finance could help you either now or in the future, it is worth considering taking out a CBILS loan before the application window closes.
Those who have already obtained one CBILS loan can take out additional finance via the scheme as well, while those who have previously taken out a smaller Bounce Back Loan can also transfer this into the CBILS and borrow more.
You will just need to ensure that you request enough funds to cover the cost of repaying your Bounce Back Loan, in addition to the extra funds you want to request through the CBILS.
From our experience, businesses seem to feel more confident having taken out a loan, as it allows them to not only deal with immediate issues but also build cash reserves.
If you later find that you do not need the funding then it can be repaid in full before the repayments begin, as there is no early settlement penalty.