Coronavirus Business Interruption Loan Scheme

Covid-19 will have a significant impact on cashflow for many businesses.  The Government have announced details of how it is planning to help, with the introduction of the Coronavirus Business Interruption Loan Scheme. (CBILS)

What is CBILS?

  • CBILS, or Coronavirus Business Interruption Loan Scheme, is a government backed loan scheme introduced to try and help businesses with short term cashflow problems caused, or likely to be caused, by the Coronavirus outbreak.

What businesses are eligible for the scheme?

To be eligible your business must:

  • Have a UK based business activity with annual turnover or no more than £45m
  • Have a borrowing need because of the Coronavirus outbreak
  • 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

Smaller businesses from most sectors can apply for the facilities.

What types of Finance are available under the scheme?

  • Term loans I.e. traditional loans
  • Overdrafts
  • Asset Finance I.e. borrowings against the business assets such as plant and machinery or stock
  • Invoice financing I.e. borrowings against your debtors ledger

How much can I borrow and what are the key features?

  • Up to £5m facility: The maximum value of a facility provided under the scheme will be £5m.
  • 80% guarantee: The scheme provides the lender with a government-backed, partial guarantee (80%) against the outstanding facility balance, subject to an overall cap per lender.
  • No guarantee fee for SMEs to access the scheme: No fee for smaller businesses. Lenders will pay a fee to access the scheme.
  • Interest and fees paid by Government for 12 months: The Government will make a Business Interruption Payment to cover the first 12 months of interest payments.
  • Finance terms: Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.
  • Security: At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under. For facilities above £250,000, the lender must establish a lack or absence of security prior to businesses using CBILS. If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
  • The borrower always remains 100% liable for the debt

Are there other options I should consider before applying for CBILS?

Yes. Whilst most businesses will hopefully already be looking into these measures, applications for CBILS will have a better chance of success if businesses are actively managing cash by utilising grant funding under the available government schemes. Lenders want to see you are exhausting all other options and assessing the effect of these options on short term cashflow, before thinking of applying for a loan.

I have existing loans and facilities but need further funding, should I apply for a loan under the CBILS?

If your business already has some form of debt the practical advice would be to speak to your lender(s) about relaxing existing terms or conditions with your current loans/facilities first rather than taking on more debt.

Options may include:

  • Some form of capital repayment holiday on existing term loans
  • Increasing the limits on your existing credit cards
  • Extending of current temporary overdraft facilities

Once these options have been explored, then you may conclude that a loan under CBILS is also appropriate.

How do I apply for CBILS?

The advice from Government via the British Business Bank is to first contact your bank relationship manager. If you don’t have a designated relationship manager, the advice is to apply for the loans on your bank’s website.

What will give me the best chance of successfully applying for finance under the CBILS?

The banks will need to understand and be convinced that your business can support finance in the short/medium term. There is no guarantee the application will be successful and therefore it is key any financial and non-financial information submitted on the application is robust and has been thought through in detail.

Whilst each approved lender will no doubt have small differences in their own application process, they will all principally want to see a well-structured, thought out plan to give businesses the best chance of securing funds.

Some key information and practical advice to consider in advance:

  • Prepare a summary of historic trading (preferably with a cashflow) including latest management accounts
  • Prepare a summary and detailed breakdown of a short/medium term REALISTIC forecast, including a cashflow. The forecast will need to include the cash impacts of schemes such as the Job Retention Scheme and other government measures currently available.
  • Prepare a summary of your business operations including details of your assets – so that lenders can assess which type of finance under the CBILS is most suitable.
  • Be open and honest to your relationship manager and understand their position is also difficult, dealing with a  fast changing environment– we are all human and your relationship manager will be dealing with the same issues we all currently facing so showing a little empathy, patience and understanding may go a long way.
  • Personal Guarantees may be required – Security is at the discretion of the lenders therefore some of the banks currently require security in the form of personal guarantees. Based on recent discussions with our banking contacts, in this current climate, you are more likely to obtain CBILS funding through your existing Bank as opposed to another mainstream bank. – Banks are unlikely to have the appetite to lend to businesses who are not currently customers.
  • Other specialist funders, outside the 40 accredited lenders, may be able to help, but not currently under the CBILS.

CBILS could be the lifeline that businesses currently need. Current expectation is that cash from the Job Retention Scheme may not be available until the middle of May and we are expecting the demand for bank facilities to meet cashflow requirements in the interim to be significant. You will need to ensure the application and forecasts are credible and easy for the banks to process quickly. We are in regular communication with our banking contacts and we are highly experienced in how best to present a funding proposal –  we understand what they need for your CBILS loan application to have the best chance of success, and have the resources to act quickly with any help needed.

Please do get in touch with your normal contact at William Klien., to talk things through, or one of our Covid-19 support coordinators.

Please be assured that we are ready to help.

Bounce Back Loan Scheme

Some of the UKs smaller businesses could benefit from an amendment to the current arrangements, enabling them to 100% guarantees on loans of up to £50,000 under the new ‘Bounce Back Loan Scheme’.

The Chancellor announced back in March, that UK-based small and medium sized businesses could apply for interest-free loans under the Coronavirus Business Interruption Loan Scheme (CBILS) to help them through difficulties encountered as a result of the COVID-19 situation.  Some businesses however, are finding it difficult to obtain credit, leading to the latest suggestions.

This is undoubtedly good news for the UKs smaller businesses, offering a lifeline, in particular, to many of the retail and hospitality businesses that have been forced to close their doors under the lockdown restrictions.

Our understanding is:

  • The scheme is expected to go live at 9AM Monday 4th May; the application process will be completely digital, with the customer competing a two page application online. The scheme will be available via the approved banks/financial institutions rather than directly from the government.
  • The scope of lending of £2,000 – £50,000 of borrowing, termed over a maximum of 6 years, with the first year interest and capital repayment free.  Businesses can make lump sum reductions without fee/penalty. The government provides a guarantee for 100% of the debt, whereas CBILS loans are 80% guaranteed.
  • To qualify for the scheme the customer needs to be retaining profits on the most recent finalised financial accounts. The turnover needs to be less than £45M to qualify for the scheme. The loan amount is capped at £50K or 25% of turnover, whichever is lower.
  • More details are available on the government website.

Please do get in touch with your normal contact at William Klien., to talk things through, or one of our Covid-19 support coordinators.

Please be assured that we are ready to help.

Covid-19 Business Grants and Business Rate support

To help smaller businesses affected by the COVID19 situation the government will provide two grants and further Business Rates support.

£10,000 grant for all small businesses in England

Small businesses (up to 250 employees) across all sectors whose property/properties already benefit from Small Business Rates Relief (SBRR), Rural Rates Relief (RRR) and Tapered Relief (TR), will receive a grant of £10,000 per property for which they pay Business Rates.

£10,000 or £25,000 grant for Retail, Hospitality and Leisure Businesses in England

Businesses in the Retail, Hospitality and Leisure sectors whose property/properties have a rateable value of up to £15,000 (and do not benefit from SBRR, RRR or TR as above) will receive a grant of £10,000 per property for which they pay Business Rates. Those whose property/properties have a rateable value of between £15,000-£51,000 (and do not benefit from SBRR, RRR or TR as above) will receive a grant of £25,000 per property for which they pay Business Rates.

This is applicable where business premises are used as shops, restaurants, cafes, drinking establishments, cinemas and live music venues; those used for assembly and leisure; and hotels, guest & boarding premises and self-catering accommodation – see more details and an extensive list of categories.

Only one of these grants will be provided for each applicable property.

Business Rates holiday in England for Retail, Hospitality and Leisure businesses

Businesses will pay no Business Rates in the 2020/21 period where their premises are used as shops, restaurants, cafes, drinking establishments, cinemas and live music venues; those used for assembly and leisure; and hotels, guest & boarding premises and self-catering accommodation – see more details and an extensive list of categories.

This holiday will be applied automatically for the 2020/21 Council Tax period (April 2020 to March 2021) and there is no limit to rateable values. Local authorities may have to reissue bills automatically to exclude the business rate charge.

Accessing the support

Initial guidance from the government stated that local authorities will get in touch with all applicable businesses and process the grants. Whilst this should be the case, we advise that businesses get in touch now with their relevant authority (the authority/related body to which a business pays its Business Rates) and complete the applicable online forms or register their details as appropriate.

Timing of payments

The Business Rates Holiday will apply immediately and the grants will be paid as soon as the local authorities can process them. Our understanding is that some authorities have already begun to make payments whilst others have opened portals for businesses to register in advance of payments being made. At this stage it is unclear exactly when payments will be received by businesses but there seems to be a consensus of this being by mid-April (with the local authorities receiving their funding for the process 1 April).

The type of information you will or may be required to provide includes: Business Rates account reference, bank details to which the grant will be paid, company number, copy of bank statement or letter (upload), rateable value of the property, Unique Tax Reference (UTR) number (found on your Corporation Tax return).

Please do get in touch with your normal contact at William Klien., to talk things through, or one of our Covid-19 support coordinators. We can assist with applications in Wolverhampton, Birmingham and Nationwide.

Please be assured that we are ready to help.

Discretionary Business Grants

Local councils have made a range of new top-up grants and loans available to small businesses in response to the COVID-19 situation.
Small Business Support Top-up Grants

Details of discretionary grants of up to £10k, £10k and £25k for small businesses not previously qualifying for the Business Rates-related Property Grants.

Available for business: 

  • not subject to Business Rates (and therefore don’t qualify for Small Business Rates Relief);
  • have fewer than 50 employees;
  • have significant ongoing fixed building related costs (such as rent);
  • can demonstrate a significant fall in income in recent months due to Coronavirus restriction measures and;
  • were trading before 11 March 2020

The type of businesses that appear to be able to apply include (but may not apply for every Council): 

  • Small businesses in shared or other flexible spaces
  • Regular market traders who do not have their own Business Rate assessment
  • Bed and Breakfasts (who pay Council Tax instead of Business Rates)
  • Nurseries not eligible for Small Business Rates Relief
  • Certain supply chain businesses supporting the Retail, Leisure or Hospitality sectors
  • Charity properties in receipt of Charitable Business Rates Relief (and who would otherwise be eligible for Small Business Rates Relief)

*If a business has received a £10k or £25k grant already because it benefits from Small Business Rates Relief or is in the Retail, Service and Hospitality Sector then they will not be eligible for this grant.

Please do get in touch with your normal contact at William Klien., to talk things through, or one of our Covid-19 support coordinators. We can assist with applications in Wolverhampton, Birmingham and Nationwide.

Please be assured that we are ready to help.