Following the Chancellors announcement on the 2 April the existing CBILS loan terms have been both widened and simplified. Implementation will still be down to individual accredited lenders but we can now give more guidance on how the scheme will be implemented in practice.

The scheme is designed to support business with funding that it would have been able to repay had it not been for the current situation.

The Facts

  • The scheme opened on the 20th of March and accredited lendershave been updating their front-line staff on how they will implement the scheme. As a first action, visit your lender’s website as some have fact sheets or application portals or, if you have one, contact your Relationship Manager
  • The scheme is available to businesses with up to £45 million turnover with UK-based business activity. At least 50 per cent of the business’s turnover needs to be in the form of a trading activity. Another scheme CLBILS is available for larger businesses.
  • Facilities guaranteed can be in the form of loans; overdrafts; invoice financing or asset finance, although each lender will be able to choose which elements of the scheme it will support. We have found that most lenders are offering only the loan option
  • Facilities will be made available from £1,000 to £5 million although again, each lender will determine its own criteria
  • The facilities will be interest-free for the first 12 months as the government will cover this
  • No fee will be payable for set up
  • Loan facilities and asset finance will have to be repaid over a maximum of 6 years, whilst other facilities will be available up to 3 years
  • The government will provide the lender with a guarantee for 80 per cent of the facility amount
  • The borrower will remain 100 per cent liable for the debt and the guarantee is simply to provide some recourse for the lender to the government in the event of default by the borrower.
  • Personal guarantees cannot be sought by lenders if the loan request is up to £250,000. Over that amount, at the lenders discretion, personal guarantees can be requested up to 20% of the loan amount
  • Under no circumstances can the security for the loan be tied into any family main residence
  • Some sectors will not be eligible to apply under the scheme. Full details and an FAQ link to the British Business Bank can be found here: https://www.british-business-bank.co.uk/wp-content/uploads/2020/03/British-Business-Bank-CBILS-FAQs-for-SMEs-FINAL.pdf

Key issues

Accredited lenders have delegated authority to agree to facilities for borrowers so they must go through a full credit assessment process in each case.

A key change to come in after the 2nd April is that if an application is to be granted for COVID -19 support reasons it will be eligible to be put through the scheme thereby giving access to the interest free 12 month period.  Previously, for those with sufficient security for lenders to agree facilities on normal commercial terms they would first have to go down that route.

The fact that a full assessment will be needed will require the borrower to provide a plan.  That plan is likely to require up-to-date accounts; management accounts and financial projections.

If you feel you may need to access this scheme you should be getting the information ready now as demand is likely to be high and those with a ready-made plan will be in the best position to access support.

Your first point of contact should be with your lender, however, please contact us if you need further support with planning.  Our corporate finance team stands ready to assist those in need of a projection package and for some, grant funding for a proportion of the cost may be available.

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Smailes Goldie Group

Smailes Goldie Group

We are a leading firm of chartered accountants, tax advisors and business advisors offering a full range of financial advice for you, your family and your business. Our clients range from SMEs and large corporations to Owner Managed and Family Businesses, Professional Partnerships, Sole Traders, New Businesses, Charities and the Not for Profit sector.

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