5 Things to Consider when Applying for the Coronavirus Business Interruption Loan Scheme

Apr 1, 2020

The Coronavirus Business Interruption Loan Scheme (CBILS for short) provides SMEs experiencing revenue loss and cash flow disruption due to the COVID-19 pandemic with access to financial support of up to £5 million. The scheme is part of the UK government’s wider temporary and targeted support for businesses package and is being administered through loans, overdrafts, invoice finance and asset finance. While the CBILS is designed for SMEs, there is also support available for larger companies via the COVID-19 Corporate Financing Facility. Through this scheme, the Bank of England will buy short term debt from larger firms that are experiencing a short-term funding squeeze, enabling them to finance their short term liabilities.

5 Things to Consider when Applying for the Coronavirus Business Interruption Loan Scheme

More than 40 accredited lenders are currently able to offer the scheme, including high street banks, challenger banks, asset-based lenders and smaller specialist local lenders. Some of our own British Business Bank-backed lender partners are also participating in the scheme. To qualify for CBILS, a business must be UK-based with a turnover of no more than £45 million per year and meet the British Business Bank CBILS eligibility criteria. 

Unsurprisingly, we’ve witnessed a huge increase in demand for business finance over the past couple of weeks, with almost 8,800 SMEs requesting more than £720M in loans through our platform in the last two weeks alone. As such, we want to use our experience and understanding to highlight a few key points and clear up some common misconceptions about the scheme.

Here are 5 things to keep in mind when applying for the Coronavirus Business Interruption Loan Scheme, in no particular order:

1. Eligibility: Which businesses can access the scheme?

On April 3rd 2020, Chancellor Rishi Sunak announced that the government is extending the CBILS so that all viable small businesses affected by COVID-19 will now be eligible should they need finance to keep operating during this difficult time (not just those unable to secure regular commercial financing).

According to the British Business Bank, to qualify for CBILS businesses must:

  • Be UK-based in its business activity

  • Have an annual turnover of no more than £45 million

  • Have a borrowing proposal which the lender: would consider viable, were it not for the COVID-19 pandemic / believes will enable you to trade out of any short-term to medium-term difficulty

  • Generate more than 50 per cent of its turnover from trading activity

  • Use the CBILS -backed facility to support primarily trading in the UK 

Businesses from any sector can apply, aside from the following:

  • Banks and building societies

  • Insurers and reinsurers (but not insurance brokers)

  • Public-sector organisations, including state-funded primary and secondary schools

  • Employer, professional, religious or political membership organisations

  • Trade unions

Sole traders and freelancers are eligible as long as their business activity is operated through a business account and meets the above-mentioned eligibility criteria.

Furthermore, the new Coronavirus Large Business Interruption Loan Scheme (CLBILS) will ensure that more firms are able to benefit from government-backed support. It will provide a government guarantee of 80% to enable banks to make loans of up to £25 million to firms with an annual turnover of between £45 million and £500 million, giving banks the confidence to lend to more businesses which are impacted by coronavirus but which they would not lend to without CLBILS. 

Man writing on paper with pen

What documentation will I need to apply for the scheme?

If you decide to apply for a CBIL, you have the following documents ready:

  • Cash flow statement showing the projected impact of COVID-19 over the next 3-6 months

  •  A borrowing proposal

  • Your business’ latest end of year accounts

  • Your business’ latest management accounts (full P&L and Balance Sheet)

 2. Time: How long will it take for funding to become available?

Note: we will update this as soon as we have more information.

As we’re in week 1, it’s difficult to say exactly how long approval will take and it will also differ from lender to lender. However, we predict that the average expected time will be 4-5 weeks for approval and funds in your account. This estimation is based on anecdotal feedback from the lenders and our clients who have applied for the CBILS scheme so far.

As you can imagine, demand is high. Some customers have even reported that it’s taken 4-5 days for banks just to take down the details of their business before starting an application.

3. Interest rates: When will I start paying interest on my CBILS loan?

The government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied charges, so your first year is interest-free. You can spread repayments of your loan from 1 to 6 years. From year 2 onwards, you’ll have to pay significant interest rates – last week one CBILS lender approved a client at 32%.

4. Banks: Can I access CBILS through a traditional bank?

A large portion of individual banks seem to only be providing CBILS to their own customers. If declined by your bank, there are currently one of two regional lenders to approach, but the panel is in fact limited. We believe more lenders need to have access to CBILS to assist UK businesses across the spectrum and have written a letter to the Treasury to request this.

There are currently 37 CBILS-accredited lenders and partners, including Barclays Bank plc, HSBC Bank plc, NatWest, Royal Bank of Scotland and Metro Bank. Access the full list here.

5. Personal guarantees: Does CBILS require a personal guarantee?

The government will provide lenders with a guarantee of 80% on each loan (subject to pre-lender cap on claims), however, as the borrower, you will remain 100% liable for the debt. The Big Four banks have agreed that they won’t take personal guarantees as security for lending below £250,000 under CBILS, according to the BBB.

On April 3rd 2020, the government announced that they will be stopping lenders from requesting personal guarantees for loans under £250,000, and making operational changes to speed up lending approvals.

What next?

At Funding Options, our team is working around the clock to help businesses gain access to the financial support they deserve. We want you to know that we’re here for you and encourage you to get in touch if you have any questions about CBILS or lending in general.

If you aren't eligible for CBILS you may still be eligible for Alternative Finance. Alternative lenders can make funding available now at the same cost, through existing products that are not CBILS. You may also get it faster, enabling you to turn your business around now.

If you’re looking for working capital, fill out our short form and a member of the Funding Options team will get back to you as soon as possible.


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