Coronavirus Business Interruption Loan Scheme

Insights 01.04.2020 Author: John Dickinson

Our Corporate Recovery and Insolvency experts have spent the past few days analysing the Government's Coronavirus Business Interruption Loan Scheme (CBILS) and have collated the key points you need to consider.

At CBW, we have a dedicated team to assist you with all of your enquiries and to assist you in these uncertain times. The team comprises top professionals across all disciplines including tax, Business Advisory and HR. We appreciate that many of you are fighting to keep your businesses going with the enormous changes imposed by the current lockdown. The government announced very early that they would be providing support in the form of the Coronavirus Business Interruption Loan Scheme to enable banks to provide funding to businesses who have been directly hit by the effects of COVID-19.

We have, over the last few days, consulted with both banks and clients regarding the CBILS, and are therefore able to provide you with a list of key considerations.

What you need to know about the CBILS

• The scheme is available to all businesses not just those that are incorporated.

• Unlike some of the other schemes this is not a grant, it is a loan and will need to be repaid.

• There has been a lot of press coverage, not all favourable. We can all be trapped by taking notice of newspaper headlines or disappearing down the wormhole of social media.

• It is clear that whilst lending criteria may differ from bank to bank and whilst the banks are being encouraged to lend the money that the banks will be assessing the applications on a case by case basis and will be applying the normal commercial test before advancing any money.

• It is also becoming apparent that not all businesses will qualify for the CBILS scheme for instance where businesses have sufficient security or asset base then the banks may just offer funding on normal commercial terms. There may be room to negotiate but in these instances the bank will not have the security of up to 20% Government backing.

• But it must be remembered that despite the noise from MP’s this is not a handout and the bank are under pressure to ensure that all the relevant criteria are met before making the loan including securing charges and personal guarantees where appropriate. However, to address concerns raised by many businesses, on 2 April 2020, Rishi Sunak confirmed that lenders will be unable to request personal guarantees for borrowing of up to £250,000. In some instances, despite obvious hardship caused by COVID–19, the business may not qualify for the loan because there is sufficient security for the loan to be made on normal commercial terms.

• Undoubtedly, our clients will be looking to us for assistance or advice when applying, if they aren’t, then they should be.

• It is probably not appropriate to forum shop. The first point of call will be your existing bankers.

• There will be a requirement to demonstrate that all cost saving measures and concessions, Furloughed staff, VAT holiday, Time to pay arrangements, rent holiday etc.  have been exhausted.

• As normal the size of the loan will be directly proportional to the amount of information required to support the request. This will include up to date management information, forecasts, cashflows and business plan.

• The banks are likely to be inundated with requests of all sizes. The negative responses will come back quicker than the acceptances. It is much easier to get it right first time.

• Larger firms with a turnover of up to £500m will also be eligible for more help – with state-backed loans of up to £25m available to firms with revenues of between £45m-500m.

• In some instances, a loan may simply not be appropriate.

What next?

If you have any questions or concerns regarding the Coronavirus Business Interruption Loan Scheme, please get in touch with a member of our Corporate Recovery and Insolvency team.