To help businesses in these stark times of such an economic emergency and comfort them in such an eerie situation, the government has launched a new, temporary Coronavirus Business Interruption Loan Scheme to support small and medium scale businesses to have them access bank lending and overdrafts. British Business Bank is delivering it. All major banks and 52 accredited lenders are offering this scheme.
Eligibility for CBILS
Businesses that qualify all the following conditions shall be eligible for applying for a loan under the scheme of CBILS:
- UK-based business
- Annual turnover of up to £45 million
- The borrowing proposal which the lender would consider viable, if not for the coronavirus pandemic
- The business is adversely impacted by the coronavirus. A self-declaration needs to be given regarding the same.
The following businesses are not eligible to apply:
- Banks, insurers and reinsurers (but not insurance brokers)
- Public-sector bodies
- State-funded primary and secondary schools
Features of Coronavirus Business Interruption Loan Scheme (CBILS)
- Interest rate: The Government will pay a Business Interruption Payment to cover the first 12 months of interest and lender fees, thus reducing the immediate amounts payable by a business.
- Fees: Zero guarantee fees for SMEs to access the scheme.
- Form of facility: The finance may be made available in the form of term loans, overdrafts, invoice finance, and asset finance.
- Guarantee: This facility is backed by a partial guarantee of 80% by the government. (However, the borrower remains 100% liable for the debt notwithstanding the 80% government guarantee).
- If the amount sought to be borrowed is more than £30,000 then you shall be required to confirm that your business wasn’t classed as a business in difficulty on 31 December 2019.
- Loan period: The length of the loan shall depend on the type of finance opted.
- for overdrafts and invoice finance facilities: up to 3 years
- for loans and asset finance facilities: up to 6 years
How to apply for a loan under CBILS?
You can apply for the finance facility under CBILS on the website of over 50 accredited lenders including all main retail banks. You have to have an approach, that`s suitable lender yourself via the lender’s website.
You shall be required to furnish the following information and documents while applying for the finance facility under CBILS:
- Amount to be borrowed
- Reason for borrowing
- The time period by which it would be repaid
- Documents required
The documents required to verify the repaying capacity of the borrower shall vary from lender to lender. However, generally following documents shall be required:
- management accounts
- cash flow forecast
- business plan
- historic accounts
- details of assets
Processing the finance request
Once all the information and documents are submitted to the lender, they will perform their due diligence about the loan by assessing the following parameters:
- a suitable business purpose
- affordable for you
- the right type of finance suits your needs
The lender will also decide whether to offer you a loan or another type of finance. However, if the lender turns you down you can resort to one of the following options:
- Apply to other lenders in the scheme.
- Take the services of a broker to help you find the right type of finance for your needs.
- Do research using the British Business Bank’s finance guide and apply again for the right type of finance.