Published Wednesday 28th October 2020
The Coronavirus Business Interruption Loans Scheme (CBILS) aims to support small and medium-sized businesses that are struggling due to the continuing effects of the COVID-19 pandemic.
The scheme was first launched in March and can now be accessed through over 100 accredited lenders and is managed by the British Business Bank.
Here, we give an overview of the loan, how it can be used and what its lasting implications or repayment conditions may be.
If you are a struggling business, you may benefit further from the help of our cost reduction consultants here at Expense Reduction Analysts. Why not get in touch to find out how we could support your business through these difficult times?
An Overview of the Loan
If your business has not yet applied for the CBILS, you are still able to submit an application as the deadline has recently been extended from the 24th of September to the 30th of November.
The loan can provide between £50,000 and £5 million to cover a range of finance products including asset finance, invoice finance, overdrafts and term loans. This boost could be a potential life-saver for many smaller businesses that have become strained because of lockdown measures.
To be eligible for the loan, businesses must:
- be based in the UK
- have an annual turnover of at least £100,000 in 2019
- have an annual turnover that does not exceed £45 million in 2019
- be able to present lenders with a viable proposal
- not be classed as a ‘business in difficulty’ prior to the coronavirus restrictions
- only use CBILS for business purposes
To support your application and convince lenders, you must also provide the appropriate documents and information. This will include recent and historic management accounts, current business plans, cashflow forecasts and asset details.
On its initial launch, the scheme was accessible through just 40 accredited lenders, but as more have been added, the number of businesses able to benefit from CBILS has increased.
Further benefits of the loan include no setup fees and a payment holiday for the first 12 months.
Who Can Make Use of CBILS?
Above, we outline the basic requirements for eligibility for the loan but not every sector will be able to make use of it.
The loan is unavailable to:
- Insurers
- Public sector organisations
- Banks and building societies
- Membership organisations (employer, professional, political or religious)
- Trade unions
Certain lenders may also specialise in particular areas of business and only lend to their chosen sectors.
How Can CBILS Be Used?
The scheme is devised for businesses that may not meet a lender’s usual commercial lending requirements but would be considered viable if not for the effects of COVID-19.
The loan can only be used to support business activity and trading in the UK. If the majority of business is through exports but at least some activity takes place in the UK, you may still be eligible. CBILS finance can be used to support and supplement multiple avenues; you may use the loan for:
- Paying your employees as they come out of furlough schemes
- Managing other areas of cash flow
- Buying or leasing a new property for business use
- Purchasing inventory
- Investing in and developing a new project
- Expanding the business
- Further research and development
Before committing to anything, you should check with your lender as they may have other restrictions that will not permit the loan being used in certain ways.
It must be made clear that CBILS is a loan and not a grant; you, the business, will be responsible for the appropriate repayments at a rate agreed by your lender.
Long-Term Impacts and Repayments
Unsurprisingly, businesses who have made use of the loan will be keeping an eye on the future and will want to assess the possible long-term effects brought about by the loan.
The loan intends to support businesses get back on their feet, but with the uncertainty and speculation that surrounds the pandemic, any immediate return to normalcy seems fraught. Threats of further lockdowns or local measures could see businesses needing further loan support.
Although the CBILS gives the lender a government-backed guarantee, businesses still remain wholly liable for the loan and debt.
While the government will cover the first 12 months of interest payments and lender-levied charges, businesses will be responsible for all repayments after this period. Interest rates will be negotiated and set by individual lenders, which businesses will be charged with after this initial 12-month period.
A CBILS loan can be repaid early, and businesses will not be faced with repayment charges. Extensions for the loan can also be requested through your lender.
A keen eye will need to be kept on the continued viability of the scheme and whether businesses will be able to keep up with repayments or whether further uncertainties will cause additional problems.
Other Loan Options
This CBIL scheme is by no means the only support scheme that aims to help businesses through the difficulties posed by the pandemic.
The Bounce Back Loan Scheme and the Coronavirus Large Business Interruption Scheme are other loan options for businesses of varying sizes and will be subject to slightly different terms.
Some schemes may be accessed together; however, the Bounce Back Loan cannot be accessed if a business is also supported by CBILS and vice versa.
Comparatively, a Small Business Grant Fund (SBGF) from local councils can be used in tandem with CBILS; having access to an SBGF will not automatically make you ineligible for other loans and schemes.
The specifics of your business and situation will help decide which loan scheme or combination of schemes is best suited to you.
Here at Expense Reduction Analysts, we have been working closely with businesses throughout the pandemic, helping them to reduce expenses and plan for cost reduction. If you are a struggling business that would benefit from the expertise of our team, why not contact us to find out how we could be of help?