Business Interruption Loan Scheme & Bounce Back Loans


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Support for businesses through the Coronavirus Business Interruption Loan Scheme (CBILS)

The Coronavirus Business Interruption Loan Scheme (CBILS) was announced by the chancellor on 11th March and has since been developed and extended to businesses with a turnover of up to £45 million.
The scheme has been designed to help businesses manage their finances given the unprecedented situation many are currently facing. It aims to support those SME businesses that were trading successfully before Covid-19 but which may now face experiencing lost or deferred revenues, or disruptions to their cashflow as a result of the current disruption and those businesses whose growth requirements cannot supported under normal bank lending criteria.

What is the Coronavirus Business Interruption Loan Scheme?

If a lender is not able to extend finance under its normal criteria, then it will look at a business’ eligibility under the Coronavirus Business Interruption Loan Scheme. If a business is eligible for the scheme, then the lender will consider whether the scheme could be used to help as a second option. In line with the Government scheme, where lenders can provide finance to a business under their normal criteria and pricing this is still the route to access finance.

The CBIL scheme provides lenders with a government-backed guarantee of 80 percent on facilities of up to £5 million in cases where a lender would not otherwise be able to provide finance to a business. Lenders may require security for the facility. For facilities above £250,000, the scheme requires that available assets are pledged, this exclude charges over a borrower’s primary residential property. The government will provide a grant payment to SMEs to cover the interest and initial fees levied by the lender (e.g. arrangement fees) in the first twelve months so that the SME does not have to cover these.

The scheme therefore allows a lender to provide the business with a facility that they would not otherwise have been able to do.

How do I access the Coronavirus Business Interruption Loan Scheme?

The scheme is accessible through businesses’ normal points of contact with lenders. If businesses have concerns about their finances, they should contact their lender for support as early as possible. Given the high volumes of calls that all banks are receiving at the moment, including from vulnerable customers requiring immediate support, businesses may want to contact their lender online first. Lenders’ dedicated Covid-19 support pages will provide further information.
Businesses do not need to contact the British Business Bank to access this scheme.

Lenders will assess whether the Coronavirus Business Interruption Loan Scheme is an option once they have assessed it and confirmed that they are not able to provide finance on normal criteria.

What are the criteria for businesses to be eligible for this scheme?

To be eligible for the scheme a business must be:
1. Based in the UK, with a turnover of no more than £45 million per annum;
2. Seeking a facility up to £5 million;
3. Operate within any business sector (Some different terms will apply for a small number of sectors, including for some agriculture, aquaculture and transport businesses);
4. Able to evidence viability (see below).

What if a business is viable but can’t get finance because of short-term disruption as a result of Covid-19?

Lenders will assess the viability of a business before Covid-19 disruption, accepting that there may be short-to-medium term performance impacts during the current environment. The scheme has been designed to help businesses manage their finances given the unprecedented situation many businesses are currently facing.

The scheme is designed to support those businesses that were trading successfully before Covid-19 but now face difficulties as a result of the current Covid-19 disruption. Lenders will have to assess that the business is viable, however they will be able to account for the exceptional concerns over the short-to-medium term business performance due to the impact of Covid-19. The finance should be deemed to be sufficient to enable a business trade through short-term cashflow difficulties.

How do I evidence my viability?

As with other external finance applications, businesses will need to have a sound borrowing proposal (notwithstanding the disruption caused by the current Covid-19 pandemic). The required details to evidence this will vary by lender but might include providing information such as recent accounts and trading information, as well as cash flow forecasts. Lenders will provide their own guidance on what information they need to assess a finance application.

Will I have to pay interest on my loan?

If a business is eligible for the CBIL scheme, then the government will provide a grant payment to SMEs to cover the interest and initial fees levied by the lender (e.g. arrangement fees) in the first twelve months so that the SME does not have to cover these. After this twelve month period interest will be payable and lenders will let businesses know what this cost of this is.
With a loan facility it may be necessary to provide capital repayments on a regular basis, but lenders may be able to provide capital repayment holidays subject to discussions with them.

Businesses who borrow under the CBIL scheme will also not be subjected to early repayment charges should they chose to repay their financing before its term ends.
Businesses will still be 100% responsible for paying the facility back, as well as interest and fees charged by the lender after twelve months.

When can I access the scheme?

The scheme will be available to businesses from the week commencing 23rd March 2020. Lenders’ standard facilities are available today and businesses should not hesitate to go to lenders’ online advice pages or ask lenders to ask about these options.

Banks are experiencing a significant number of calls, including from vulnerable customers, and it will be much quicker for businesses to check the guidance online to identify the best way to access the scheme.
While lenders are committed to providing access to the scheme for businesses some lenders may take a few more days to ensure the scheme can be deployed through their channels. Firms are working as quickly as they can to ensure businesses can access the support they need.

What products can I use through the scheme?

A variety of products can be covered by the scheme (as below). Each lender will have decided which products to become accredited to use:

  • Term loan facilities
  • Overdrafts
  • Invoice finance facilities
  • Asset finance facilities

Not all lenders are accredited for all types of products and they will be able to discuss with businesses what they can offer to best suit their needs.

Does it cover all sectors?

The scheme covers all business sectors, although different terms may apply for businesses in a small number of sectors, including agriculture, aquaculture and transport.

Is there any limit on the term length of products under the scheme?

Products covered by the scheme have a maximum term of 6 years, however for overdraft and invoice finance facilities, please note that terms are up to 3 years.

Can I access the scheme through any finance provider?

Not all lenders are accredited by the government and some may only be accredited for certain products. Many lenders are working closely with the British Business Bank to become accredited as quickly as possible. Lenders will be able to tell businesses their accreditation status and for which products.

All lenders are providing guidance on the best way to access support on their websites. This information is being updated regularly to provide businesses with guidance and to help them access the finance they need.

Will the funds available run out?

The government has indicated that there is no maximum cap set for the amount of total lending to be supported through the new scheme – it will be demand led. Therefore, there is no immediate need to approach lenders if a business does not need finance in the short-term.

Is the CBIL Scheme a loan or a grant?

The scheme is not a grant. The scheme provides a guarantee to a lender to allow them to provide finance, but businesses will still have to repay this loan or facility.
Business are liable for the debt and lenders may ask for personal guarantees and security over business assets to support the borrowing facilities.

The government has announced a number of support measures for businesses such as grants which businesses may be eligible for. Further information on these initiatives is available here.

What sort of personal guarantee or security will businesses have to provide?

Under the terms of the scheme, security may be required and all available assets are required to be pledged for facilities over £250,000. Primary Residential Property will not be taken as security under the scheme.

Standard requirements for Business Interruption Loans applications

Personal Financial Profile
Typically this will include; (Please note not all will be applicable)

  • Personal Details
  • Full name
  • Date of birth
  • Nationality
  • Relationship status – Single / Widowed / Surviving Civil Partner / Married / In Civil Partnership / Living with Partner
  • Number of dependents
  • Age of dependants
  • Occupation (where applicant is in salaried employment)
  • Name of employer
  • Date of employment commenced
  • Gross annual wage/salary
  • Dividend received from employer
  • Residential Status – home owner / renting / living with parents / other
  • Address
  • Date moved into address
  • Previous address if less than 3 years

Spouse Partner Details

  • Full name
  • Date of birth
  • Nationality
  • Occupation
  • Name of employer
  • Date employment commenced
  • Net monthly salary

Personal Assets

Primary Residence

  • Estimated present value
  • The property is; Owned Solely / Jointly
  • Mortgage outstanding
  • Name of lender
  • Mortgage type Interest Only / Capital and Interest
  • Remaining commitment
  • Current interest rate Fixed / Variable
  • Monthly repayment Other Properties

Estimated present value

  • The property is; Owned Solely / Jointly
  • Mortgage outstanding
  • Name of lender
  • Mortgage type Interest only / Capital and interest
  • Remaining commitment
  • Current interest rate Fixed / Variable
  • Monthly repayment
  • Total estimated value of other property
  • Total mortgages outstanding
  • Total monthly mortgage repayments on other property
  • Total gross monthly income from other property

Other Personal Assets

  • Cash deposits
  • Quoted shares- Please specify
  • Life polices – (surrender value)
  • Other – Please specify

Other Personal Liabilities

  • Credit cards / store cards
  • H.P Agreements, overdrafts, lease agreements
    – name of lender
    – type of funding
    – credit limit
    – amount outstanding
    – monthly instalments
    – remaining term
    – amount outstanding
    – credit / store cards cleared monthly

Personal Guarantees – Detail

– Who
– Purpose of guarantee
– Amount

Monthly Income and Expenditure break down

  • Income
  • Net salary / drawings
  • Spouse / partners net salary
  • Benefits (child benefit)
  • Property investment income
  • Investment income – Please detail
  • Pension and trust
  • Other regular income – Please detail

Expenditure

  • Personal mortgage / rent
  • Other mortgages
  • Other finance costs
  • Life assurance / pension contributions
  • Insurance
  • Council tax
  • Housekeeping
  • Leisure & clothing
  • Utilities
  • T.V / phone internet
  • Child costs (including maintained, school fees)
  • Other expenditure – please detail

 

BUSINESS FINANCIALS

Information required to prepare a twelve month projected cash flow profit and loss and balance sheet.

Money In’s

– Trading Income (Per Month)
– Other (Directors loan)
– Government Support (required funding)

Essential Money Out

– Stock
– Electric
– Gas
– Directors salary
– Website
– Pension
– Wages and NIC
– Rent
– Business and water rates
– Premises insurance
– Car contract hire
– Car fuel
– Office supplies
– Telephone, internet & mobile
– Accountancy fees
– Repairs and maintenance
– Sundry and cleaning
– Bank charges
– Other – please specify
– Loan repayments

Summary

In short, the scheme is:

  • A borrowing facility to provide Cashflow support to SME businesses experiencing lost or deferred revenues, or disruptions to their Cashflow due to Covid-19 or for funding for investment when lenders cannot support a finance application under normal criteria.
  • Provided as a loan, overdraft, invoice finance facility or asset finance facility.
  • Available for products with a maximum term of 6 years (3 years for invoice finance and overdraft facilities).
  • Accessed through lenders if they are accredited and available on lending up to £5 million.
  • Due to go live in most cases from the week commencing 23rd March 2020.
  • Open to eligible SMEs which are:

    UK based, with sales or turnover of no more than £45 million per annum

    Operate within any business sector (different terms will apply for a small number of sectors, including: Agriculture, Aquaculture and Transport. More details on this will be available here.

    Have a sound borrowing proposition and are viable (notwithstanding short-term disruption) but are unable to meet the lenders’ normal criteria.

The government will provide a grant payment to SMEs to cover the interest and initial fees levied by the lender (e.g. arrangement fees) in the first twelve months so that the SME does not have to cover these.
Security may be required and all available assets are required to be pledged for facilities over £250,000.

(Source: https://www.ukfinance.org.uk/coronavirus-business-interruption-loan-scheme)

Bounce Back Loans for Small Businesses

This scheme will help small and medium-sized businesses affected by coronavirus (COVID-19) to apply for loans of up to £50,000.

This scheme is not available yet. It will launch on 4 May 2020.

The Bounce Back Loan scheme will help small and medium-sized businesses to borrow between £2,000 and £50,000, or 25% of business turnover.

The government will guarantee 100% of the loan and there won’t be any fees or interest to pay for the first 12 months.

Loan terms will be up to 6 years. No repayments will be due during the first 12 months. The government will work with lenders to agree a low rate of interest for the remaining period of the loan. The scheme will be delivered through a network of accredited lenders.

Eligibility

You can apply for a loan if your business:

  • is based in the UK
  • has been negatively affected by coronavirus
  • was not an ‘undertaking in difficulty’ on 31 December 2019

Who cannot apply

The following businesses are not eligible to apply:

  • 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

If you’re already claiming funding

You cannot apply if you’re already claiming under the Coronavirus Business Interruption Loan Scheme (CBILS).

If you’ve already received a loan of up to £50,000 under CBILS and would like to transfer it into the Bounce Back Loan scheme, you can arrange this with your lender until 4 November 2020.

How to apply

The Bounce Back Loan scheme will launch on 4 May 2020. More information about the scheme will be published shortly.