CBILS in sixty seconds: What you need to know

12th April 2020

 

What is CBILS?

CBILS is the short name for the Coronavirus Business Interruption Loan Scheme. It’s the new scheme, announced by The Chancellor, to help smaller businesses across the UK who are struggling with cashflow as a result of the current crisis.

Key Details

The scheme covers a range of business funding solutions, including term loans, invoice finance, overdrafts and asset finance facilities. It provides the lender with a government-backed guarantee, which means that a credit decision from a lender could change from ‘no’ to ‘yes’.  Key characteristics of the scheme are:

  • Loans of up to £5m: The maximum value of a facility provided to you under the scheme will be £5m, to be repaid over a period of up to six years
  • 80% guarantee: The scheme provides the lender with a government-backed, partial guarantee against the outstanding balance of your loan
  • The government will cover the first 12 months of interest payments and lender-related fees, which means no up-front costs in most cases. As the government is covering interest payments for the first 12 months, you will have lower repayments during this period
  • Personal Guarantee: You will not be required to provide a personal guarantee for loans below £250,000. For loans above this amount, the lender can ask for a personal guarantee
  • Finance terms: Up to six years for term loans and asset finance facilities, and three years for overdrafts and invoice finance facilities. Previously, if a lender could offer you finance on normal commercial terms, you would not be eligible for the CBILS scheme. This no longer applies
  • Security: At your lender’s discretion, the scheme may be used for unsecured lending for facilities of up to £250,000.

You will remain 100% liable for the debt.

 

How do I apply?

You can see a list of participating lenders here. You can apply directly to your current bank. You can use Funding Xchange to understand solutions from other CBILS-accredited lenders you may be eligible for. Please note that accredited banks and lenders are experiencing a high volume of customer enquiries.

 

What if my bank isn’t part of the scheme or can’t provide me with finance?  

If your bank cannot help, there are almost 50 lenders accredited to CBILS, however in practice you may only be eligible for two or three of these. To help you focus your efforts, we’ve written a post outlining the five different ways of accessing CBILS and the approach of different lenders, so you can explore what type of lender is most likely to provide funding to your business.


Will I have to use my home as collateral to secure the debt?

No, the government has said that no one needs to put up their home as security to benefit from the scheme. If you are seeking less than £250,000 in funding, you will not need to provide a Personal Guarantee.


Is CBILS available to new businesses?

Yes, but you could also consider other sources of finance such as Start Up Loans, where you can still apply for a startup loan of up to £25,000, while second loans remain available to eligible existing customers. They have a dedicated support section on their website.

 

Will all small and medium-sized firms be able to borrow money?

Not necessarily. You will have to prove that you have a viable business, which been trading successfully before the crisis, but just need extra support to deal with short term difficulties caused by the current disruption.

 

Can self-employed people apply?

Yes, if you’re self-employed and have an annual turnover of up to £45m, operate using a business bank account, and generate more than 50% of your revenue from trading activity. It doesn’t matter whether you’re a sole trader, freelancer or a small partnership.

The government has also rolled out a package of support for the self-employed as part of its Self-employment Income Support Scheme.

 

Other support for your business

CBILS is part of a range of emergency measures which includes deferred VAT payments and salary grants of up to 80%. For wider information on how to protect your company, including your people, please see the government COVID-19 for business website.

And if you cannot access CBILS funding, you may still be able to access finance. Funding Xchange helps you get offers from over 50 lenders, both part of, and separate to the CBILS scheme.