80% Guarantee is not all
The Coronavirus Business Interruption Loan Scheme (CBILS) is essentially a rehash of the Enterprise Finance Guarantee (EFG) which probably means it’s going to be pretty useless for most businesses.
The challenge will be that banks have to make a decision on commercial grounds - in other words would they have lent to this business if it hadn’t been negatively affected by COVID-19?
And, sadly, this means many businesses just won’t cut it.
Essentially what CBILS does is provide a guarantee of 80% of the outstanding balance for any debt taken out. Remember that this guarantee protects the bank, not the business - the business remains 100% liable for the full debt and lenders will initiate their usual recovery proceedings prior to relying on the government backing.
This is a loan not a grant
- 80% Government guarantee
- No interest for the first 12 months
- No arrangement fees
- No early repayment fees
- No personal guarantees for facilities under £250,000
- 6 year repayment terms (loans and asset finance)
- 3 year repayment terms (overdrafts and invoice finance)
- Maximum facility - £5 million
CBILS will be administered by the British Business Bank operating through ‘participating providers’ - a list of which can be found on the British Business Bank’s website. It includes all of the high street banks.To be eligible for the scheme your business must:
- Be UK based
- Have less than £45m in annual turnover
- Have a proposition that the bank considers would be commercially viable if it were not for the current pandemic
- Have been adversely impacted by COVID-19 (this is a self certify)
- Not have been classed as a “business in difficulty” on 31 December 2019, if applying to borrow £30,000 or more
Our advice - look at the Bounce Bank Loans instead!
You need to approach one of the participating providers in the same way that you would approach any lender for finance - so a business plan, management accounts and financial forecasts will be required.