Firstly CBILS (often misspelt as CIBILS) is a scheme that can provide facilities of up to £5m for smaller businesses across the UK. It is for businesses who are experiencing losses or deferred revenues, leading to disruptions to their cashflow. CBILS supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance facilities.
Secondly the scheme provides the lender with a government-backed guarantee potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’.
When can I access the scheme?
The scheme went live on Monday 23 March 2020 and will run until the 31st March 2021 (at the time of writing).
What are the key features of CBILS? CBILS guarantees facilities up to a maximum of £5m available on repayment terms up to six years for term loans and asset finance.
For overdrafts and invoice finance facilities, terms will be up to three years.
The scheme provides the lender with a government backed partial (80%) guarantee against the outstanding facility balance. There is no guarantee fee for SMEs to access the scheme. Lenders will pay a fee to access the scheme. The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees.
You (the SME) will therefore benefit from no upfront costs and lower initial repayments.
At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under.
For facilities above £250,000, the scheme requires the lender to establish a lack or absence of security prior to businesses using CBILS.
Primary Residential Property (PPR) cannot be taken as security under the scheme. If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
In summary the borrower will always remain 100% liable for the debt. The CIBLS guarantee is to the lender, not you, the SME.
How do I know if I’m eligible to apply?
Smaller businesses (SMEs) from all sectors can apply for the full amount of the facility, up to a maximum of £5m.
To be eligible for a facility under CBILS, your business must:
- Be located within the UK and have business activity with annual turnover of no more than £45m
- Provide a borrowing proposal which, were it not for the COVID-19 pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable your business to trade out of any short-to-medium term difficulty
- If a lender be able to offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
How can I access the scheme?
CBILS is available through the British Business Bank’s 40+ accredited lenders, which are listed on the British Business Bank website.
All Star Funding Solutions has access to a number of lenders portals to access the scheme on your behalf. We can complete, process and monitor your application on your behalf (Free of charge).
Decision-making on whether you are eligible for CBILS is fully delegated to the 40+ accredited CBILS lenders. These lenders range from high-street banks, to challenger banks, asset-based lenders and smaller specialist local lenders.
Note: if the accredited lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
What are the fees to borrow under CBILS?
The fees for CBILS vary per lender and range from 1.8% – 15% (Max). There are no set up fees, interest or capital repayments for the first 12 months as these are covered by the Government.
What types of finance are available and who offers which type? CBILS supports a wide range of business finance facilities, including:
• Term loans • Overdrafts • Asset finance • Invoice finance
What types of businesses is CBILS for?
The scheme is designed to support smaller businesses (SMEs) who don’t meet a lender’s normal lending requirements for a fully commercial loan or other facility, but who are considered viable in the longer-term.
Will I need security to get a CBILS-backed loan?
At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under. For facilities above £250,000, it requires the lender to establish a lack or absence of security prior to businesses using CBILS. Primary Residential Property (PPR) cannot be taken as security under the scheme.
Do I need to evidence that I have a viable business?
Yes. You must show in your borrowing proposal that were it not for the COVID-19 pandemic, your business would be considered viable by the lender, and for which the lender believes the provision of finance will enable your business to trade out of any short-to-medium term difficulty.
What’s happening to the old Enterprise Finance Guarantee Scheme (EFG)?
The EFG scheme is temporarily suspended at this point in time. If you wish to apply for a financing facility, your lender will be able to assess if you are eligible under CBILS.
How long will CBILS run for?
CBILS will was set to initially run for six months but with numerous lockdowns the latest deadline is 31st March 2021. (at time of writing)
Will the CBILS funds run out so I can’t access the scheme? No. Government has confirmed that the amount of funding available under the scheme will be demand-led.
Are sole traders / freelancers eligible?
A business account should have been in operation. The scheme is open to sole traders, freelancers, body corporates, limited partnerships, limited liability partnerships or other legal entity carry out a business activity in the United Kingdom, with annual turnover of up to £45m, operating in all sectors4.
The business must generate more than 50% of its turnover from trading activity.
Can Lenders take a Personal Guarantee to cover the 20% loss that the Bank will make?
No, if a lender makes a claim on the CBILS guarantee it will be after the lender has completed its normal recovery procedures (including realisation of any Personal Guarantees). The CBILS guarantee covers 80% of the lenders post recoveries claim. The lender will always suffer a 20% loss when claiming on the CBILS guarantee.
I am getting other kinds of aid to help respond to COVID-19 – can I still get a loan?
The criteria does not require Lenders to take into account the other forms of support that SMEs may be benefiting:
e.g. business rate reliefs or grants unrelated to the CBIL scheme.
How is CBILS different from the EFG scheme?
CBILS is a new scheme. It is different from EFG in a number of ways.
- CBILS provides the lender with an 80% government backed partial guarantee against the outstanding facility balance, subject to an overall portfolio cap. Under EFG this was 75%.
- There is no guarantee fee for SMEs to use CBILS.
- The Government will make a Business Interruption Payment to cover the interest and any lender-levied fees in the first 12 months of any CBILS facility, so smaller businesses will benefit from no upfront costs and lower initial repayments (originally announced as 6 months). Following earlier discussions with the banking industry, some lenders indicated that they would not charge arrangement fees or early repayment charges to SMEs borrowing under the scheme. HM Government greatly appreciates this approach by lenders.
- The maximum facility provided under CBILS will be up to £5m. Under EFG, this was £1.2m
- CBILS is for borrowing proposals which, were it not for the current COVID-19 pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to medium term difficulty. The EFG scheme was only for facilities considered viable under the lender’s commercial terms.
- CBILS is available to businesses with annual turnover of no more than £45m. EFG was available to businesses with annual turnover of no more than £41m.
If you have any further questions please contact your current provider, not the British Business Bank.
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