Coronavirus Business Interruption Loan Scheme (CBILS)

April 2, 2020

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

Key points:

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

One of the little publicised problems with CBILS is that if a business wants a facility that is not going to be repaid in full by 31 December 2020 then it is restricted to borrowing a maximum of 25% of its 2019 turnover or twice the annual wage bill. Given that the minimum CBILS loan is set at £25,000, it means it is pretty much less than useless for any business with annual turnover below £100k.

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.