I have been in the Insolvency industry for over 30 years and throughout that time I have seen directors throw...
It’s more than fair to say that the COVID-19 pandemic, and the fall-out for businesses as a result of it, was hugely unprecedented. Something else that no one could have foreseen this time last year is also the amount of Government funding that has been made available to help combat the economic problems that have occurred as a result of COVID, with UK national debt estimated to have increased by over £180bn between March to August alone. In this post, we look at why businesses should take advantage of the Coronavirus Business Interruption Loan Scheme.
What is the Coronavirus Business Interruption Loan Scheme?
The Coronavirus Business Interruption Loan Scheme, commonly referred to as CBILS, provides support for businesses to access funding if certain eligibility criteria are met. Launched in September, the deadline for new applications is 31 January 2021.
Designed to provide lenders with a government-backed guarantee, the government has announced that CBILS will be demand-led and will be resourced accordingly.
What are the key features of CBILS?
- The maximum loan value under the scheme is £5 million, repayable over six years.
- The government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.
- Personal guarantees for facilities under £250,000 cannot be taken.
- Personal guarantees for facilities above £250,000 may be required at a lender’s discretion, and recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied.
- The scheme provides the lender (i.e. the bank or alternative lender) with a government-backed, partial guarantee (80%) against the outstanding facility balance. Recoveries are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied.
- The borrower always remains 100% liable for repayment of the debt. Debt repayment holidays or payment deferrals will be at the discretion of the lender. If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
Why should businesses apply for CBILS?
Via CBILS, businesses will benefit from no upfront costs and lower initial repayments. Plus, smaller businesses from all sectors can apply for the full amount of the facility.
CBILS is available through the British Business Bank’s 40+ accredited lenders, which are listed on the British Business Bank website here. Initially, businesses should approach their own provider – ideally via the lender’s website. They may also consider approaching other lenders if they are unable to access the finance they need.
About Lines Henry
Lines Henry are a long-established firm, dealing with all aspects of Personal and Corporate Insolvency. As Licensed Insolvency Practitioners, we know that both businesses and individuals can go through some difficult times, and often just sharing the situation with someone else can help.
At Lines Henry, we take the stress out of difficult circumstances, by gaining an understanding of the situation, evaluating the alternatives, and assisting in the process to get to the best outcome for all concerned. Contact us to find out more.