Coronavirus Business Interruption Loan Scheme (CBILS)
The Government have announced further measures to support businesses affected by the current global Coronavirus outbreak.
The Coronavirus Business Interruption Loan Scheme (CBILS) was announced at the recent Budget and is intended to work similarly to the Enterprise Finance Guarantee (EFG) Scheme, although it will offer far more attractive terms to both businesses and lenders, with a view to ensuring the availability of finance to businesses during the current pandemic.
These loans are intended to cover running costs, the cost of acquiring stock, etc, thus enabling businesses to continue where they may not have been able to without the availability of such financial support.
The initial loan offering was capped at £1.2M per business, though the Chancellor increased this figure to £5M per business yesterday. The Government will guarantee 80% of the loan, with the banks retaining the risk on the remaining 20%. The Government will also cover the interest payments for the first 6 months of the loan to give businesses further assistance from a cashflow perspective, though ultimately the borrower will always remain 100% liable for the debt.
In essence this is very similar to any other business loan, it is just structured slightly differently from the outset to give businesses a helping hand, though not every business will be able to borrow the full £5M.
This lending does not just have to be made by way of a loan, Overdrafts and both invoice and asset finance facilities are also available methods of borrowing.
To ensure that businesses do not overstretch themselves, there is relevant qualifying criteria which has to meet before a business can apply for such financial assistance. Whilst the details, specifications and eligibility of the scheme is at present being reviewed, currently the business must:
• Be UK based, with a turnover of no more than £41 million per year
• Operate within an eligible industrial sector (Exclusions: Banks, Building Societies, Insurers and Reinsurers (but not insurance brokers); The public sector including state funded primary and secondary schools; Employer, professional, religious or political membership organisation or trade unions.)
• Have a sound borrowing proposal, but insufficient security to meet a lender's normal requirements
• Be able to confirm that they have not received de minimis State aid beyond a €200,000 equivalent over the current and previous two fiscal years
Once a business has satisfied any necessary qualifying requirements it can then make the relevant application to a lender.
To apply for a loan you will need to approach one of the many lenders accredited by the British Business Bank (BBB). This list can be found HERE and is maintained by the BBB.
The BBB website is constantly being updated at present as processes are agreed their end and we are of course monitoring this regularly. They have published a disclaimer on their website due to the ever-evolving nature of the current situation. We will however, advise you of any important changes as and when they arise.
How can Sopher + Co help?
As with most business loans it is likely that you will be required to provide accounts to support any financial assistance. You may also be asked to provide management accounts for the current accounting period, cashflow forecasts to demonstrate the ability to repay, an accountant's certificate or reference, etc and we will of course be able to assist you with these.
We can also assist with calculating a viable sum to borrow to help the business, by reviewing staffing costs, overheads, etc for you before any application is made to ensure that a sufficient amount is being considered.
We will do our utmost to prioritise these applications, or anything else we can help with, given how important this funding could be for the future of your business.
It's important to mention that whilst tax bills are also a cost for the business, the CBILS financial assistance isn't really intended for this purpose. HMRC have also announced that they are prepared to make time to pay arrangement with businesses to ease the burden here and have set up a dedicated hotline to deal with any queries in this regard. More from HMRC on this can be found HERE.
Should you wish to discuss anything in more detail or if you would like specific advice then please do not hesitate to contact your Sopher + Co adviser. Alternatively you can complete our online contact form, email us at firstname.lastname@example.org or call 020 8207 0602.