Coronavirus Business Interruption Loan Scheme (CBILS) – Major update

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We recently provided clients and friends of the firm with a detailed analysis of the Coronavirus Business Interruption Loan Scheme (CBILS):  https://www.src-time.co.uk/blog/important-coronavirus-business-interruption-loan-scheme

However, the Chancellor announced last week some improvements to the scheme for small businesses as some lending institutions had not shown the engagement and flexibility anticipated by the government.

The most common hurdles have been:
•    Requirements for directors to put their homes or savings up as collateral.
•    The need to demonstrate no other means of funding before accessing the CBILS.
•    High interest rate charges following the initial 12-month interest-free period.
•    Personal guarantees

As a result, the Chancellor announced that the scheme would be extended to all viable small businesses affected by COVID-19.  There had been debates on line and in the print media that an unacceptable number of small and medium-sized businesses would become insolvent before accessing emergency funds.

New rules will prevent lenders from requesting personal guarantees for loans under £250,000.  For facilities above £250,000, personal guarantees may be taken, excluding the borrower’s Principal Private Residence, and capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied.

The government has also stated that it will make operational changes to speed up lending approvals and continue to cover the first twelve months of interest and fees.

Here are links to the major high street banks:

Lloyds Bank:    https://www.lloydsbank.com/business/coronavirus/cbils.html
NatWest Bank: https://www.business.natwest.com/business/support-centre/service-status/coronavirus/government-scheme.html
Barclays Bank: https://www.barclays.co.uk/business-banking/borrow/coronavirus-business-interruption-loan/
RBS Bank: https://www.business.rbs.co.uk/business/support-centre/service-status/coronavirus/government-scheme.html
HSBC: https://www.business.hsbc.uk/en-gb/finance-and-borrowing/credit-and-lending/coronavirus-business-interruption-loan-scheme

New loan scheme for larger businesses

A new Coronavirus Large Business Interruption Loan Scheme (CLBILS) was simultaneously announced to support mid-tier firms not covered by the original measures.

This scheme also provides a government guarantee of 80% to banks making loans of up to £25m to businesses with an annual turnover of between £45m and £500m.

Loans backed by the guarantee will be offered at commercial rates of interest, but the government will not cover interest or fees in the same way as the small business scheme.

The new scheme will launch later this month and will support a wide range of finance products including short term loans, overdrafts, invoice finance and asset finance.

Businesses would remain responsible for repaying any facility they may takeout.

To be eligible, your business must:
•    be UK-based in its business activity
•    have an annual turnover between £45 million and £500 million
•    be unable to secure regular commercial financing
•    have a borrowing proposal which the lender:
o    would consider viable, were it not for the COVID-19 pandemic
o    believes will enable you to trade out of any short-term to medium-term difficulty
You should apply to your bank for this type of loan.

SRC-Time are one of the South East’s leading accountancy firms in advising businesses in all aspects of their accounting and tax affairs and we are able to assist in any issue raised above.

Our expert team is available to provide you with advice and can be contacted on 01273 326 556 or you can drop us an email at info@src-time.co.uk alternatively, speak with an account manager to get any process started.

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