CBILS is a new route to financing, specifically designed during the coronavirus pandemic to aid and assist UK small and medium-sized businesses (SME’s) access loans and other routes of finance quicker and more easily, such as overdrafts and invoice finance.
The COVID-19 business interruption loan (CBIL) is as the name suggests a loan, and therefore not a grant; meaning the business is liable for all of the repayments.
Operated through the British Business Bank and its accredited lenders, the new CBILS facility offers:
- up to £5 million of loans and other finance, including overdrafts and invoice finance
- the government guarantees 80 pc of the finance to the lender
- the government pays interest and any fees for the first 12 months
- there are terms of up to three years (for overdrafts and invoice finance) and up to six years (for loans and asset finance)
It’s important to note that the CBILS is different from the Bounce Back Loan Scheme (BBLS). More money can be accessed through the CBILS, as well as alternative routes of finance. With the CBILS the government guarantees 80 per cent of the finance (opposed to a 100 pc through the BBLS), plus the lender will ask for more information to ensure your business would be viable if it wasn’t for COVID-19 pandemic.
Guidance details of the CBILS, including the information a lender/bank needs.
How to apply for the CBILS new route to financing
To be eligible for the CBILS?
Your business needs to:
- be based in the UK
- have an annual turnover of up to £45 million
- have a borrowing proposal the lender would consider viable if it wasn’t for coronavirus pandemic
- have been adversely impacted by coronavirus pandemic (the applicant can self-certify for this)
- not have been classed as a ‘business in difficulty’ on 31st December 2019, if applying to borrow £30,000 or more
Find a lender who’s participating in the CBILS
There’s a growing list of lenders currently taking part in the CBILS. Which include high-street banks, as well as challenger lenders.
A business should first approach their existing bank to see if they’re taking part. Most providers will have details of the scheme on their website (the British Business Bank says phone lines will be very busy, so banks will struggle to handle offline queries).
The available types of finance between lenders will vary, as will the amount available, so when looking towards accessing the CBILS, properly research your options.
Information your lender will ask for
The lender will first need to know how much you’d like to borrow, as well as why the business needs to borrow the money (the business purpose) and the timescale it intends to pay it back.
The lender will undoubtedly ask for supporting documents, like:
- management accounts
- cash flow forecast
- business plan
- historic accounts
- details of assets
But if a small loan is being requested there might not be a need to provide all of this information, the intention being for the process to be automated in such cases.
The lender will make a decision
From the details supplied the lender will work out whether the loan the business has applied for is right for them.
In the case of the CBILS, lenders cannot ask for a personal guarantee of any form for finance below £250,000 (a personal guarantee being where an individual could be personally made liable for the loan if their business defaults on payments).
Where the finance being sort is above £250,000, the personal guarantee is capped at 20 pc of the balance after assets have been applied, excluding the main residence.
While the government guarantees 80 pc of the loan, the business remains 100 pc liable for all of the loan repayments. Therefore businesses wishing to make a CBILS application should ensure that they can repay the debt in the future.
Should a business be turned down by a lender, they can still make a further CBILS application via a different lender.