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Coronavirus Business Interruption Loan Schemes (CBILS and CLBILS) – Top 10 Questions Answered



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Coronavirus Business Interruption Loan Schemes (CBILS and CLBILS) – Top 10 Questions Answered

The Covid-19 pandemic and the lockdown instituted through the UK to combat it’s spread have brought businesses to a standstill. Whether you are a small business or a mid-to-large enterprise, this pandemic has emerged as a ‘black swan’ event that has thrown a surprise spanner in the works. Without government support, a number of businesses would not be able to survive this crises.

To help businesses and to minimize layoffs, the government has announced a number of schemes to provide financial support to businesses. In this article, we will answer the most commonly asked questionsed related to these two loan schemes. 

Note: The purpose of the below article is to highlight the key information related to the CJRS scheme, and it does not constitute business or legal advice. For detailed information on the topic, please read HMRC’s Guidance

1. What it CBILS? 

CBILS is short for Coronavirus Business Interruption Loan Scheme. 

The UK government announced the Coronavirus Business Interruption Loan Scheme (CBILS) on March 23rd, as a part of its various measures to offer financial support and relief to UK businesses. This scheme focused on UK SMEs, with an annual turnover of less than 45 million. 

2. What is CLBILS?
CLBILS is short for Coronavirus Large Business Interruption Loan Scheme. 

On 3rd April, the government announced the CLBILS, which helps mid-to-large size UK businesses with an annual turnover of more than £45 million access finance/loans more easily. This is seen as an extension of the earlier scheme, with special features that are more relevant to enterprise businesses. 

3. Why did the UK government announce these schemes? 
A large number of small businesses, SMEs and enterprises across the UK are facing revenue loss and reduced cash flow owing to the Coronavirus pandemic. In order to support viable businesses facing cash flow pressures during this time, the UK government has announced a series of financial support measures to help businesses during this difficult time. 

CBILS and CLBILS are a part of this, and the key purpose is to make it easier for businesses to access finance by providing the lender a guarantee for the loan repayment, backed by the government. This is in response to a number of businesses complaining that they are not able to secure regular commercial financing owing to the situation created by Covid-19. 

The government has amended the schemes over the period, making it easier and less risky for businesses to access loans from accredited lenders. 

4. What are the key benefits of CBILS?
As a part of CBILS, viable small businesses and SMEs with less than 45 million annual turnovers can access up to £5 million in the form of overdrafts, invoice finance, term loans or asset finance. 

  • Government pays the interest and fees for the first 12 months. SMEs do not have to pay any guarantee fees. 
  • Government backs the loans and other lending partially, encouraging lenders. 
  • Personal guarantees from the business owners are not required for lending below £250,000
  • For financing facilities above £250,000, after business asset proceeds, the recovery on personal guarantees is capped at a maximum 20% of outstanding balances. 
  • Principal Private Residence is excluded from recovery. 
  • Repayment terms: Up to 3-6 years

5. What are the key benefits of CLBILS?
As a part of CLBILS, viable mid-to-large UK businesses can access finance in the form of term loans, asset finance, invoice finance and revolving credit facilities. 

  • For businesses with an annual turnover between £45-250 million, lenders may provide up to £25 million. 
  • For businesses with annual turnover above £250 million, lenders may provide up to £50 million. 
  • Government provides lenders partial guarantee (80%) against
  •  outstanding balance, encouraging them to lend.
  • Personal guarantees are not required for sums below £250,000
  • Above £250,000, personal guarantees may be needed but are capped at maximum 20% of losses after applying all other recovery methods.  
  • Repayment terms: Up to 3 years

6. Who is eligible to apply for the CBILS? Who cannot apply for it?
You are eligible if you are a UK-based business:

  • With annual turnover below £45 million
  • Able to self-certify that business has been adversely impacted by Covid-19 pandemic  
  • Able to create a borrowing proposal that the lender would consider viable if the impact of coronavirus was taken out of consideration 
  • Able to convince the lender that your business will be able to trade out of any short-term or medium-term difficulties

You are not eligible if your business falls in any of the below categories: 

  • Banks, insurers and reinsurers (but not insurance brokers)
  • Public-sector bodies
  • Further-education establishments, if they are grant-funded
  • State-funded primary and secondary schools

7. Is my business eligible to apply for CLBILS? 
You are eligible if you are a UK-based business:

  • With annual turnover above £45 million
  • Able to self-certify that business has been adversely impacted by Covid-19 pandemic 
  • Not a recipient of COVID-19 Corporate Financing Facility
  • Able to create a borrowing proposal that the lender would consider viable if impact of coronavirus was taken out of consideration 
  • Able to convince the lender that your business will be able to trade out of any short-term or medium-term difficulties

You are not eligible if your business falls in any of the below categories: 

  • banks, insurers and reinsurers (but not insurance brokers)
  • building societies
  • public-sector bodies
  • further-education establishments, if they are grant-funded
  • state-funded primary and secondary schools

8. How to apply for CBILS or CLBILS?
UK SMEs can apply for the Coronavirus Business Interruption Loan Scheme accredited lenders across the country. The key steps for the application are: 

  • Choose a lender – not all lenders will be able to provide all the different type of finance that you can access as a part of the scheme. The amount of finance offered may also differ. Choose a lender that fits your requirements. 
  • Approach the lender – as there is a high demand for CBILS, it may not be possible to reach the lenders via phone. In-person visits may not be possible owing to the lockdown. So the best way to approach is via the website. 
  • Prepare a strong application that can convince the lender that a) you are eligible for the loan and b) your business has the capacity to service the loan in the future. Remember – you can access finance through this scheme only if the lender is convinced that your business will be able to overcome any short-term or medium-term difficulties. 
  • If one lender rejects you, all is not lost. You still have the option to approach other accredited lenders. 

9. What data do I need to gather for preparing a CBILS or CLBILS application? 
The requirements and process for the CBILS application may differ from lender to lender. One key requirement will be for documents that demonstrate your ability to make the repayment. This may include:
Cash flow forecast

  • Historic accounts
  • Details of assets
  • Management accounts
  • Business plan

Additionally, the lender will want to know the amount of the loan you want to borrow, the business purpose and the type of finance suitable to it, and the period in which you’ll make the repayment. 

10. What steps can my business take to prepare a strong application? 
Before you make the application, the first step is to check and confirm your businesses’ eligibility. 

The next step is to figure out how much financial support your business requires, for what purpose and what is the best type of financing for it - of overdrafts, invoice finance, term loans or asset finance.

One effective method is to create a checklist of all the documents that a lender may require and have them ready – you may be approaching multiple lenders, and it would be good to have the information ready. 

Apart from the key documents mentioned in the above answer, you can also prepare documents detailing the benefits your business is taking from other government measures, actions your organisation has taken to manage working capital better and cut expenses, and your post-lockdown recovery plan. 

Help for preparing the application
QX is supporting its clients and other UK businesses in their efforts to access CBILS and CLBILS loans up to 250,000. We can help you with: 
Assessing eligibility  

  • Preparing management reports and other documentation
  • Support and analysis of your financial modelling 
  • Putting together the application 

If you need any support with your application, please do not hesitate to reach us at contact@qxfa.co.uk

 



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