Government Support for small sized businesses: Coronavirus Business Interruption Loan Scheme (CBILS)

The Coronavirus Business Interruption Loan Scheme (CBILS) provides financial government support to smaller businesses (SMEs) across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak.

CBILS has been significantly expanded along with changes to the scheme’s features and eligibility criteria. The changes mean even smaller businesses across the UK impacted by the coronavirus crisis can access the funding they need.

The scheme helps small and medium-sized businesses to access loans and other kinds of finance up to £5 million. The government guarantees 80% of the finance to the lender and pays interest and any fees for the first 12 months.

Please note that as of 2 November, the Government has announced that the Coronavirus Business Interruption Loan Scheme (CBILS) will be extended until 31 January 2021

Eligibility

You can apply for a loan if your business:

• is based in the UK
• has an annual turnover of up to £45 million

You need to show that your business:

• would be viable were it not for the pandemic
• has been adversely impacted by the coronavirus

If you want to borrow £30,000 or more, you also need to confirm that your business wasn’t classed as a business in difficulty on 31 December 2019.

Which businesses meet the “business in difficulty”/ “undertaking in difficulty” criteria?

A business or undertaking in difficulty includes:

·         Individuals or companies that have entered into collective insolvency proceedings;

·         Limited companies which have accumulated losses greater than half of their share capital in their last annual accounts (this does not apply to SMEs less than 3 years old);

·         Partnerships, limited partnerships or unlimited liability companies which have accumulated losses greater than half of their capital in their latest annual accounts (this does not apply to SMEs less than 3 years old);

·         Where the undertaking has received rescue aid and has not yet reimbursed the loan or terminated the guarantee, or has received restructuring aid and is still subject to a restructuring plan;

·         A company which is not an SME where, for each of the last two accounting years: i) your book debt to equity ratio has been greater than 7.5; and ii) your EBITDA interest coverage ratio has been below 1.0.

From 30 July 2020, the business in difficulty test does not apply to micro or small businesses. Micro and small businesses are businesses that have fewer than 50 employees and less than £9,000,000 in annual turnover and/or annual balance sheet total. However, to be eligible to the Coronavirus Schemes, micro and small businesses must not be (a) subject to collective insolvency procedure under national law, or (b) in receipt of rescue aid (which has not been repaid) or restructuring aid (and are still subject to a restructuring plan) at the time they apply for a scheme facility

What is the definition of an SME for CBILS?

Under CBILS, the definition of SME is confined to the turnover of an applicant (or an applicant’s group), which must not exceed £45 million. The borrower cannot be an individual other than where the individual is a sole trader or a partner in a partnership and is acting in a business capacity.

Are sole traders/freelancers eligible to apply for CBIL?

Provided that they satisfy the other eligibility criteria for the Scheme, CBILS is open to:

·         sole traders

·         freelancers

·         bodies corporate

·         limited partnerships

·         limited liability partnerships, and

·         any other legal entity carrying out business activity in the UK with:

·         an annual turnover up to £45 million, and

·         business activity operating through a business account operating in any sector

The business must generate more than 50% of its turnover from trading activity.

Who cannot apply for CBILS?

Businesses from any sector can apply, except:

• banks, insurers and reinsurers (but not insurance brokers)
• public-sector bodies
• state-funded primary and secondary schools

How long the loan is for

The maximum length of the facility depends on the type of finance you apply for and will be:

• up to 3 years for overdrafts and invoice finance facilities
• up to 6 years, for loans and asset finance facilities

How to apply for CBILS

There are over 50 lenders participating in the scheme including all the main retail banks. You should approach a suitable lender yourself via the lender’s website.

You’ll need to tell the lender:

• the amount you’d like to borrow
• what the money is for
• how long you’d like to pay it back

Supporting documents

You’ll need to provide documents that show you can afford to repay the loan.These may include:

• management accounts
• cash flow forecast
• business plan
• historic accounts
• details of assets

The documents required will vary from lender to lender and depend on how much you’re asking for. If you’re asking your existing lender for a small loan, the process may be automated and not require all of the documents.

The lender will check that the loan is:

• for a suitable business purpose
• affordable for you
• the right type of finance for your needs

The lender will decide whether to offer you a loan or another type of finance and you’ll be responsible for repaying 100% of the amount borrowed.

If the lender turns you down

If one lender turns you down, you can apply to other lenders in the scheme. You may want to consider using a broker to find the right type of finance for your needs  You can find the full listing of accredited lenders in the British Business Bank website.

Please check our other articles on Business Help from UK Government available in our website “Corona Virus Job Retention Scheme”

For more information on CBILS, please give us a call on +44 07828 580251and one of our staff members will be happy to assist you.

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