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Coronavirus Business Interruption Loan Scheme (CBILS) FAQs

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John Foundling - Menzies Accountant

John Foundling
Corporate Finance Partner

DD: +44 (0)1489 566706

Mike Grayer - Menzies Accountant

Mike Grayer
Corporate Finance Partner

DD: +44 (0)20 7465 1964

Since their announcement, CBILS remains a ‘moving feast’ with changes every day, from lenders and from the British Business Bank’s negotiations with the lenders. In our conversations with relationship managers and directors, it’s clear that the banks are stretched as they deal with a host of enquiries including the consideration and discussion of CBILS.

We’ve compiled the following list of FAQs to help you understand the latest information around CBILS and how it might impact your decision to apply for the scheme. All businesses will need to adapt and in the first instance we would recommend all SME business owners speak to their banks to understand all options available to them.

We will be updating these FAQ’s over the coming days, as the scheme and the lenders approach continues to develop. Please let us know if you have any specific questions and we will do our best to answer them.

IMPORTANT REMINDER: In our experience, bank customers who work with [use] their accountants to prepare information (e.g. last full years accounts, latest management accounts and forecasts) and to support them in presenting their case have a much higher application success rate.

Last updated 7 April 2020

Support for businesses through the coronavirus business interruption loan scheme

What is CBILS?

The Coronavirus Business Interruption Loan Scheme ‘CBILS’ is one of a package of measures introduced by the UK Government to assist businesses impacted by Covid-19. Under the scheme the Government will provide a guarantee for 80%, to a lender, to enable the lender to provide a loan to eligible businesses. Please note that the scheme enables lenders to lend and businesses to borrow money, which the business will need to repay in full.

The guarantee provided by the Government is to encourage the lender to make the loan available despite the uncertainty in these unprecedented times.  

Who is eligible?

All businesses affected by Covid-19 with turnover up to £45m, provided the business was viable before Covid-19.

How can I prove my business is viable?

Ideally the last full year accounts and the latest management accounts should demonstrate profitability before Covid -19.

In addition your forecasts should demonstrate that the business could have afforded the repayments before Covid-19 and also that you can afford repayments once the business has recovered.

Can I still apply for loan if the business has furloughed staff?

Yes, the intention is that all applicants for loans should have sought all other available support, including the Coronavirus Jobs Retention Scheme ‘CJRS’.

How much can I borrow?

Loans of up to £5m are available.

How long a period can the loan be repaid over?

Up to 6 years.

Would a Capital Repayment Holiday be available for the Loan?

Probably, lenders can offer a Capital Repayment Holiday, at least one main high street bank is insisting on a 12-month capital repayment holiday for all loans.

How much will it cost?

All loans are interest free for the first 12 months, and any arrangement fees will be paid by the Government, meaning that there are no upfront costs from the lender. After the first 12 months, interest will be charged at reasonable commercial rates.

Will the lender ask for security?

Yes, for loans greater than £250,000 lenders can ask for a Personal Guarantee but for only 20% of the amount of the loan, which is further capped at 20% of the outstanding liability in the event of a default after all other security has been realised.

For loans up to £250,000, lenders cannot ask for a Personal Guarantee. Following the revised details announced overnight on Thursday 2nd April, lenders are being encouraged to lend without the need to consider ‘regular’ commercial facilities first – enabling lenders to process requests more quickly, without the need to consider alternatives. Where there is perceived security already within the business it is likely that lenders may take such security in support of a CBILS facility

If we provide Personal Guarantees does that mean that our home is on the line?

No, lenders are not permitted to look to your Principal Private Residence (i.e. the house you live in).

When can I apply?

The scheme is available now and will be available for 6 months from 23 March 2020.

How long will it take for the loan to be provided?

High levels of demand are expected, which may mean that applications will take some time to process perhaps a couple of weeks. Providing the lender with the right information initially will help them to process the application.

Will the lender ask for a Personal Guarantee?

For loans up to £250,000, lenders cannot ask for a Personal Guarantee. For loans greater than £250,000 lenders can ask for a Personal Guarantee but only for 20% of the amount of the loan, which is capped at 20% of the outstanding liability on default after all other security has been realised.

Not all lenders are asking for Personal Guarantees, this is one of the areas which is still changing. Several of the high street banks are no longer asking for Personal Guarantees.

If my current bankers ask me for a Personal Guarantee, can I go to another bank to request the facility?

In theory yes, but in practise with such high levels of demand all lenders are prioritising lending to support their existing customers.

What information will the lender need with my application?

The package of information including the following:

  1. Last full years accounts
  2. Latest management accounts
  3. Forecasts (ideally 3 way forecasts – P&L, Balance Sheet & Cashflow). Ideally the forecasts should also include a sensitivity.
  4. Details of the impact that Covid-19 has had/will have on the business
  5. Details of the other measures implemented (Capital Repayment Holidays obtained, VAT deferral, Staff furloughed, etc)
  6. A schedule of other borrowings (HP, Leasing, other loans, etc).

How can I forecast the future at present?

Subject to any special circumstances in your sector, at this stage lenders will generally accept forecasts that show a six month impact from Covid-19 with a gradual recovery over the following six months.

How do I apply?

In the first instance contact your main banker / lender. Some smaller facilities are being processed via the internet, check your lenders website. Your relationship manager will be able to help you.

Can we re-finance other facilities?

No, other loans or finance facilities cannot be re-financed onto a CBILS facility. The lenders will expect you to have sought Capital Repayment Holidays on other facilities.

How much should I borrow?

Having prepared a 3 way forecast model (P&L, Balance Sheet & Cashflow) business would be wise to prepare a sensitivity taking a worst case view of the impact of Covid-19 and the time to recover which will guide you as to a sensible sum to ensure that your cashflow will be sufficient.

Whilst the loan will need to be repaid, it is interest free for the first 12 months and will not be subject to an early repayment fee, therefore if when this is over you have borrowed more than you needed, you will be able to make a lump sum reduction to the loan.

Can I repay the loan early?

Yes, CBILS can be repaid early without any early repayment fee.

My business is part of a larger group, can I still apply?

Provided your total group turnover is less than £45m, then yes you can apply.

My business has turnover in excess of £45m is there any similar help for our business?

The Government announced a Large Business Interruption Loan Scheme for businesses with turnover greater than £45m.

  • Loans up to £25m, or £50m if turnover is greater than £250m 
  • Available if the business is unable to source regular finance
  • The Government will provide the lender with an 80% Guarantee
  • Confirmation is also provided that PE firms will be able to access the scheme.

This scheme is set to launch on Monday 20th April.

We will be updating these FAQ’s over the coming days, as the scheme and the lenders approach continues to develop. Please let us know if you have any specific questions and we will do our best to answer them.

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