Is CBILS right for your business?
Date posted: 2020-05-11
Over the last few months we’ve faced the coronavirus pandemic. While the UK is still under lockdown, we’re working as hard as we can to support our clients’ businesses. We’re following the government announcements closely. It’s all a bit scary, and parts of the government’s plan are difficult to understand. We’re trying to simplify your options so you can move your business forward.
On 23rd March, the government introduced the Coronavirus Business Interruption Loan Scheme (CBILS). Since then, there have been a few revisions to the scheme and a couple of other schemes thrown in for good measure. Over the next few blog posts, we’ll look at which companies are eligible for which loans, and try to identify which scheme might be best for your business.
Coronavirus Business Interruption Loan Scheme:
Who is eligible?
Any UK-based SME (turnover up to £45m) who has been affected by the current pandemic. This is the key phrase here! The scheme has faced a fair amount of criticism over the volume of applications compared to the number of loans approved.
You’re expected to take all other types of government initiatives into account before applying for the CBILS. These include deferring your VAT payments, using the Job Retention Scheme (furloughing your staff), and using HMRC’s Time to Pay scheme.
What is available?
The CBILS scheme covers a loan value of £10,000 to £250,000. The first year is interest-free and you won’t have any capital repayments in the first 12 months either. No personal guarantees are required. The loans seem to be processed fairly quickly once they’re approved.
If you’re looking to borrow more than £250k, individual lenders can ask for a personal guarantee. The CBILS facility covers loan values up to £5m. The application process is more involved for larger sums of money and can take much longer to process. There is an alternative scheme for larger businesses (CLBLIS).
One of the key phrases used in the literature surrounding the CBILS scheme is this:
You must have a borrowing proposal which the lender would consider viable, were it not for the current pandemic
So what does that mean? Here’s an example:
An office-based company who sell advertising space would like to borrow money to upgrade their IT systems and equipment. This would allow more people to work from home and mean that they can unfurlough some staff more quickly.
Where do I apply?
Your existing lender or bank. While the government will be paying the interest and fees over the first 12 months, this is all organised through the British Business Bank. They have approved a number of lenders to offer loans as part of the scheme.
Is there a deadline for applications?
Not at the moment. The only deadline currently in place is one to convert to a Bounce Back Loan. If you’ve borrowed less than £50,000, you can switch your CBILS to a Bounce Back Loan up until 4th November 2020.
So, what should I do next?
If you’re seriously considering applying for CBILS, we suggest that you get in touch. Given the difficulty involved in submitting an application and the low success rate so far, we’d strongly advise speaking to ourselves or your existing accountant before you proceed.
We’re working in collaboration with PMD Business Finance and Funding Circle, who are now a CBILS accredited lender. We’ve submitted a number of applications from our clients this way and had some success.
At the very least you’re going to need to show:
- Two years of filed accounts, reporting a profit.
- The last six months’ bank statements
- Up to date management accounts
- Clear justification that the application is a direct result of the coronavirus pandemic
My Management Accountant are also partnered with Futrli, a cloud-based management accounting software. If you’re looking to demonstrate cashflow forecasts and generate specific management accounting reports as part of your CBILS application, we’d highly recommend Futrli. Have a look at our blog post about the software here.
We’d love to help you and your business through the Coronavirus pandemic. We know it’s a really worrying time for a lot of people and we’re trying to provide as much information as we can to our clients and associates. If you have any questions about borrowing money in the current economic climate, don’t hesitate to get in touch with our team.
Over the coming weeks we will be updating these blog posts as more information and different loan schemes come to light.