Explore more insights

What are the CBILS loans?

A closer look at the Coronavirus Business Interruption Loan Scheme, what is it, who is eligible and how do you apply?  

Ollie Maitland Apr 15, 2020

The Coronavirus Business Interruption Loan Scheme (“CBILS”) is a programme run by the British Business Bank to support businesses who can afford lending products but lack the security necessary to be approved.

 

Key facts:

  • £50,000 to £5 million loan facilities
  • Invoice finance, Term Loans, Asset Finance, Overdrafts
  • First 12 months is interest and fee free
  • Capital repayment holiday of 6 to 12 months are available
  • No PG’s for any debt under £250,000 
  • Lending above £250,000 PG’s are limited to 20% of debt
  • Insufficient security is no longer a condition to access the scheme
     

Providers

Capitalise has 29 of these 60+ lenders on our platform and our matching service will identify which products a business is eligible for. Those include:

 

provider product we can help with
* Overdrafts and Term Loans
 *  Overdrafts and Term Loans
  Overdrafts and Term Loans
Invoice Finance
Invoice Finance, Term Loan (has to be alongside an ID line)
* Term Loans
* Invoice Finance, Asset Finance, Term Loan 
* Term Loans
Asset Finance    
* Overdrafts and Term Loans
Term Loans
Term Loans (not yet accepting applications)
* £1m+ and Term Loans
Invoice Finance
Term Loan and ID
Term Loans
Asset Finance and Term Loans
Term Loans
Overdrafts
Term Loans
Term Loans / Invoice Finance
Term Loans
Invoice Finance
Term Loans/ Overdrafts
Term Loans
Term Loans
Invoice Finance
Term Loans
Term Loans


* For customers who have this institution as their own bank or lender. 
 

 

Exclusions

Loans in the scheme are limited to a maximum of 25% of 2019 turnover or double the annual wage bill, whichever is lower. 

At least 50% of revenue must be from ‘trading activities’ this excludes rental income.

Be UK-based in its business activity, with an annual turnover of no more than £45m.

Have a borrowing proposal which, were it not for the current pandemic, would be considered viable* by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty.

* (General rule is that a viable business is one that has retained profit, post dividends, year after year for last three years) 
 

 

Acceptance, interest rates and security
 

Affordability, interest and repayments

The borrower will always be responsible for repaying the loan. The government will only repay the loan if the business cannot - up to 80%.

Consequently, the financial institutions are still taking a risk on the lend. Our view, at Capitalise.com, is that lenders will only lend to businesses that have recently shown affordability to support the loan.

Lenders typically look for 1.5-2x serviceability cover based on EBITDA less Dividends less Current Debt Repayments (retained earnings)

For example - if a business seeks a loan of £180,000 over 5 years at 5% interest, the annual repayments are £39,780. 

Consequently, the business must therefore generate c£75,000 of retained earnings to evidence serviceability of this new loan. 

If the business is unable to evidence this level of serviceability, a lower quantum offer may be made or a potential decline. 

Since the announcement on 17th March 2020 by chancellor Rishi Sunak the government will require lenders to provide 12 months of interest-free:

The Government will also cover the first 6 months of interest payments, so businesses will benefit from lower initial repayments. The business remains liable for repayments of the capital. The maximum value of a facility provided under the scheme will be £5 million  (the original announcement suggested a maximum value of £1.2 million.)

Time to funds

A significant factor in the lending process is the “Time to Funds”. I.E how long does it take from submitting an application to receiving money in your account to pay e.g. rent, payroll and suppliers.

Our estimation is that this will be around 2 - 4 weeks for unsecured (meaning mostly term loans or invoice finance) and 4 - 12 weeks for secured (lending secured against property, assets etc).

The reason for this is that secured finance will typically require processes such as property valuations or second charges. Many of which take multiple weeks even at the best of time.

As a result, businesses may wish to apply for non-CBILS products alongside CBILS to have a wider range of options to choose from.

 

How does it work on Capitalise 

 

For accountants
Capitalise has set-up a dedicated flow on how to

  1. Start an application

    Capitalise platform CBILS
     
  2. Complete the required documentation


     
  3. Decide to add in non-CBILS lenders
     

For business owners

Our initial workflow is for accountants and advisers. If you as a business owner wish to apply for a CBILS loan then you may wish to go direct to the partner page or contact us to create an application for you.

 

Lender documents required

  • Last 3 years full accounts with detailed P&L - ensure serviceability
  • Last 6 months business bank statement - accountant conduct
  • Up to date management accounts - ensure serviceability
  • Aged debtor and creditor lists - ensure payments are on time
  • Confirmation of any outstanding debt (provider, term, repayment)
  • Statement of assets, liabilities, income and expenditure from Director/Shareholders
  • Cashflow forecasts used to determine the working capital required
     

And the information required

 

  • What is the purpose of the requested facility (short term cash flow/longer term cash injection) and how will the funds be specifically used to address the shortfall caused due to COVID-19?
  • Please provide detail on the amount of the borrowing request and how this amount has been derived. eg. How much are you requesting and why? 
  • On what basis has the amount been calculated? What assumptions are being used? Is it likely further borrowing at a later date will be required?
  • When the Pandemic is over, how long do you think it will take your business to recover? 
  • What changes are the business making in the short and longer term to help drive business performance back to either pre virus levels or beyond?
  • What was your Annual Sales Turnover for 2019?
  • What was your Annual Wage Bill for 2019?
  • Please provide the current number of Employees
  • What are the costs you currently have to pay in regards to running the business e.g. staffing costs, business premises costs, stock and or/other debt costs and what are you doing to reduce these? 
  • What have you been able to access in terms of government schemes in response to Covid-19 (Grants/rates non-payment/VAT deferral/Time to pay arrangements)? - please provide details
  • Is all tax up to date
     

 

FAQ's

1. How do I access the other lenders?

Capitalise has onboarded lenders who were accredited for the EFG scheme prior to the launch of the CBILS and so these are available immediately. We’re working on onboarding more of the CBILS accredited lenders to widen the group of lenders.

 

2. What happens if my bank isn’t on the CBILS list?

Right now, most of the high street banks are accepting CBILS applications only for customers who bank with them. As a result, if you or your client do not have business banking with a high street name then applying to other lenders may result in more traction. New lenders are due to join the scheme over the coming weeks.

 

3. Do I need to offer a personal guarantee or my house as security?

At present, the government has indicated that primary residence is not required as part of the CBILS security for the majority. The Big Four banks have agreed that they will not take personal guarantees as security for lending below £250,000 under CBILS

 

4. Can I refinance loans?

While EFG were not available for refinancing the CBILS scheme, the government has shared guidance that CBILS is expected to be available to refinance existing loans. This will be part of the underwriting process from each provider.

 

5. Will a firm always get a CBILS loan?

Businesses much be eligible for CBILS products based on their business history. The business must:

  • have experienced a loss in trading or any impact on business performance as a consequence of coronavirus
  • have been able to afford this lending before the coronavirus outbreak
  • be based in the UK, with a group turnover of no more than £45 million per year
  • not be subject to collections proceedings or collective insolvency proceedings (for most lenders)

Each will be subject to underwriting decisions of the each lender.

 

 

6. Will a CBILS loan always be interest free?

A CBILS loan is interest free for the first 12 months as the government will pay the lender interest for that period. 

As banks are now able to offer interest free CBILS loans even if a business qualifies for an existing lending product then all CBILS loans should be interest free for 12 months. After 12 months the product will revert to the pricing in the loan agreement - so this must be considered when taking the product.

 

7. Will Capitalise be paid commission for introductions?

Capitalise is paid a commission for non-CBILS lending and may be paid commission for CBILS depending on the provider. The CBILS scheme will remain free of fees to access whether this is accessed through Capitalise or directly.

 

8. Get funding under the EFG is not easy or quick, SME's need this money now not in 3 months time, what is the solution? 

Our expectation of the CBILS loans would be available in 2 - 4 weeks for unsecured and over 4 weeks for secured. Our recommendation is to run applications for CBILS in parallel and also non-CBILS alongside to receive a wider choice of offers.

 

Last Update: 21st July

Follow Us
Sign Up to Receive Updates

Signup to our newsletter

Have insights about the accounting community sent straight to your inbox. Sign up to our newsletter.