Whilst we welcomed the introduction of the Coronavirus Business Interruption Loan Scheme (CBILS) to provide funding support to businesses during the COVID-19 crisis, we were concerned at the accessibility of the scheme for all SMEs requiring assistance.

Initially to qualify for CBILS, annual turnover could not exceed £45million and the maximum loan was capped at £5million although last week it was announced that these limits were increasing to £500million and £25million respectively.

Furthermore, the scheme initially appeared onerous in respect of the personal guarantee requirements from business owners. However we are delighted that this has been relaxed with the following amendments to the scheme:

New Features to CBILS

  • Personal guarantees for facilities above £250,000 – Personal guarantees may still be required, at a lender’s discretion, but recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied (i.e. PG’s are limited to the portion of the loan not covered by the Government’s 80% commitment);
  • Principal Private Residence (PPR) – PPR cannot be taken as security to support a personal guarantee or as security for a CBIL backed facility;
  • Interest and fees paid by Government for 12 months – The Government will make a Business Interruption Payment to cover the first 12 months of interest payments. Banks have been instructed to waive arrangement fees and this has now been extended to cover early settlement fees so that that there is no cost to the business at all if the loan is repaid within 12 months;
  • No personal guarantees for facilities under £250,000– Personal guarantees of any form cannot be taken under the scheme for any facilities below £250,000;
  • Security – For all facilities, including those over £250,000, CBILS can now support lending to smaller businesses even where a lender considers there to be sufficient security, making more smaller businesses eligible to receive the business interruption payment. However, where there is sufficient security available, it is likely that the lender will take such security in support of a CBILS facility;
  • Self-certification – Businesses can self-certify they have been impacted by COVID-19; and
  • Retrospective changes – these changes should be retrospectively applied by lenders for any CBILS facilities offered since 23 March 2020. For any commercial (non-CBILS) facilities offered since the same date, providing the borrower meets the CBILS eligibility criteria, lenders have been asked to bring these facilities onto CBILS wherever possible and changes retrospectively applied as necessary.

From our discussions with lenders, a large number of these that are not in the original batch of 40 accredited participants, are now in the process of applying for membership to the scheme. These include “debt funds” with interesting debt products providing an alternative to the options available from the high street banks.

How we can help

Even with those welcomed adjustments, COVID-19 emergency loans are still a lot less straight forward to secure than has been presented in the media. Successful applications for a CBILS loan will require a strong business case set out in a detailed business plan supported by a robust and fully integrated monthly phased profit, cashflow and balance sheet forecast demonstrating the viability of the business.

The increasing number of lenders participating in the scheme should open up the choice of debt products available and it is important to understand the entire landscape of lenders in selecting the optimal debt product for individual requirements.

If you want to discuss how we can assist you in the preparation of you CBILS application, please do not hesitate to contact us.