Courtesy of Charles Brooks of Poppleton & Appleby (Insolvency Practitioners) we reproduce his summary and thoughts as to the process for applying for loan finance under the Coronavirus Business Interruption Loan Scheme (“CIBLS”). Before applying think carefully whether you want the burden of debt in the future.
Firstly some key information around the “CBILS”:
- 1) Loans of up to £5m over a term of between one and six years for companies with turnover less than £45m
- 2) Interest-free for 12 months
- 3) Government secures 80% of the loan (please note, the borrower is 100% liable for the borrowing). Recoveries under a personal guarantee required by a bank for loans under £250,000 are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied and will exclude the principal private residence (comment from Jan Szczepanski).
- 4) Some of the alternative lenders that offer “CBILS” specialise in different products (e.g., asset finance or invoice finance) – the banks cover all products
- 5) Applicants must go to their own bank first. If not, this will be questioned and it is likely they will be asked to go via that route
- They will first look to see if the applicant qualifies under a conventional product before considering “CBILS”
- 6) If an application is incomplete it will probably be rejected and the applicant will have to reapply, leading to delays
- 7) Each lender will have their own application form to complete as part of the submission. These can usually be found on the lender’s website
- 8) The ‘big four’ banks aren’t asking for PGs for “CBILS” below £250k Borrowers need to submit the latest financial information as well as a 12-month cash flow forecast. They will expect the borrower to have taken other measures also (VAT deferment, debt repayment holidays, rent breaks etc.)
- 9) All applications and accompanying information must fully support the amount being requested and the borrower must demonstrate that they can repay the loan when the business is back trading full time
The British Bank website can be found here.
Applicants will need to explain:
- 1) How the virus has affected their business?
- 2) What steps have been taken to safeguard the business e.g., staff
- furloughed, reduced hours, cost cuts (it is crucial these cuts are done)?
- 3) What other forms of Government help have been applied for.
- 4) The loan amount has to be repaid within the agreed term so therefore, it has to be realistic.
- Lenders will only support businesses that were viable prior to the outbreak and will be viable once the economy starts to rebuild (if a business was declined for facilities recently then there is reduced chance of them being successful with the application).