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CBILS and Overdrafts during Lockdown

CBILS and Overdrafts 

All small business owners are watching the Governments reaction to more pressure to relieve the lack of lending under the Coronavirus Business Interruption Loan Scheme.

CBILS help Covid-19
Changes to CBILS – pressure mounts on government

CBILS up to date info on Friday 17/4/20;

  • Coronavirus Business Interruption Loan Scheme (CBILS) helps affected businesses to access bank lending and overdrafts if they need to. For loans up to £5 million, the Government is providing a guarantee for each loan.
  • The first alternative lender to receive accreditation from the British Business Bank is Funding Circle who expect to start taking applications in a weeks’ time. In our experience Funding Circle act faster, can be higher interest rates, but they focus on small businesses. Applications with FC usually leave a soft footprint credit check and may be an option if the government doesn’t improve the CBIL scheme.
  • There are expected to be proposals from the financial services industry submitted that would see support for smaller firms delivered via immediate and government guaranteed extensions of up to £25,000 to overdrafts on their business current accounts, the most basic and widespread product that businesses use. Keep an eye on announcements.
  • Pressure from the Government to back 100% of the loans and cover borrower default is continuing, with the caution that continual tweaks to the CBILS will just cause confusion.
  • Large businesses are now included, that’s those with a t/o of over £45m. CLBILS is designed to provide lenders with a government-backed guarantee of 80%, to offer facilities to viable businesses with annual turnover of £45m or more, that have seen their cashflow disrupted as a result of COVID-19. Good news for mid to large companies.
Help for Norwich business - Covid-19
Many businesses are working from home during lockdown and trying to apply for the CBILS

CBILS – The scheme features as of 17/4/20

  • Up to £5m facility – The maximum value of a facility provided under the CBILS scheme will be £5m, available on repayment terms of up to six years.
  • Interest and fees are paid by government for 12 months: The government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.
  • Security – For all facilities, where there is sufficient security available, it is likely that the lender will want security in support of a CBILS facility.
  • No personal guarantees for facilities under £250,000
  • Personal guarantees for facilities above £250,000 may be required, and 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.
  • Finance terms are up to six years for term loans and asset finance facilities.
  • For overdrafts and invoice finance facilities, terms will be up to three years.
  • 80% guarantee – The scheme provides the lender (the bank) with a government-backed, guarantee of 80% against the outstanding facility balance, subject to an overall cap. Recoveries are capped at a maximum of 20% of the outstanding balance of the CBILS facility, after the proceeds of business assets have been applied.
  • No guarantee fee for SMEs to access the scheme: There is no fee payable by smaller businesses to access the scheme. Lenders will pay a small fee to access the scheme.
  • The borrower always remains 100% liable for repayment of the debt.
  • If the lender can offer a loan on normal commercial terms without the need to make use of the scheme, they will do so.
  • Application and processing time is slow as many bank staff are working from home and many big banks are overwhelmed. If you are in a queue or promised a call back, keep calling.

Stay up to date with the daily announcements and the business support in particular  to see if the CBILS access arrangements improve this week – week of April 20th

CBILS stay up to date
Coronavirus Business Interruption Scheme – Not the easiest loan to access

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