Read the latest article from the Institute for Family Business (IFB), which features a Q&A with Mark Dearman focusing on the Coronavirus Business Interruption Loan Scheme (CBILS)
What is the purpose of Coronavirus Business Interruption Loan Scheme/Coronavirus Large Business Interruption Loan Scheme?
There is a misconception that CBILS can only be used as some form of ‘bail out’ for SME’s that are in financial difficulty.
There is a wider educational piece that needs to be done to inform not just SME’s but also banks that CBILS can be used to provide working capital, investment, refinance and consolidation of debt.
I often say that CBILS is ‘greasing the wheels’ of the economy. This scheme should be used to make deals that may not be considered in the current environment, viable for lenders.
Can my business apply?
The eligibility criteria for CBILS is very broad and it has been designed that way to ensure that, in the main, most SMEs can apply.
The key criteria is:
- You must be a UK business
- You must be able to demonstrate that your business has been adversely impacted by COVID-19
- You must have been a viable business as at 31 December 2019
How do you demonstrate that you are a viable business?
Provide a suite of Financial Information – including historic trading figures and financial projections to your chosen lender.
Provide evidence that the Business would have been able to afford the financing prior to COVID-19.
Provide evidence of trading losses or negative business impact as a consequence of COVID-19.
How do we know if we are eligible?
The eligibility criteria is consistent across all lenders and most publish this on their websites, as do the British Business Bank. For example, the following is a high-level overview of the full eligibility criteria which is available on the Cynergy Bank website:
To be eligible to apply, businesses (including sole traders, partnerships or limited companies) must:
- Be UK based in its business activity
- Have a turnover of no more than £45m per year
- Generate more than 50% of its turnover from trading activity
- Be experiencing lost or deferred revenues as a result of COVID-19
- Have a borrowing proposal which, were it not for the current pandemic, would be considered viable by Cynergy Bank.
The amount of the facility applied for must not be more than:
- Double the annual wage bill of the applicant for 2019 or if the applicant commenced trading after 1 January 2019, the estimated annual wage bill for the first 2 years of operation; or
- 25% of total turnover of the applicant in 2019; or
- The applicant’s liquidity needs for the next 18 months for SMEs (this may be self-certified by the applicant).
Do we have to apply through my usual bank?
No, you do not. There are multiple lenders that are now accredited as a CBILS provider and you should engage with your professional networks, look at the British Business Bank website and approach multiple banks. One thing to be aware of is that whilst the CBILS eligibility criteria is the same / consistent across all lenders, the one thing that will be different is their credit policies. Credit Policy is driven by each individual bank and therefore each one will have different appetites for different types of lending.
For example, if Bank ‘A’ prior to COVID-19 did not have appetite to lend in the healthcare sector – I would expect this appetite to remain unchanged even with the benefit of CBILS. If Bank ‘B’ was a secured lender i.e. they always required property as security prior to COVID-19 then I would expect them to remain a secured lender, even with the benefit of the Government Guarantee.
So, it might worth approaching a number of lenders and ask them what their appetite is in relation to your own bespoke situation. Are you able to provide security? Do you need to refinance existing debt? Are you in a specialist sector?
Going to your existing bank, assuming they are an accredited CBILS lender, would always be my first port of call – but don’t be disheartened or give up if they cannot provide you with the solution you need – keep researching and probing with other providers.
Should we apply for a BB, CBIL or CLBIL?
This is an area that still gets confused – a few months into the schemes - which is due to the fluidity of the situation.
Bounce Back Loan – all loans under £50,001
CBILS Loan - £50,001 - £5m
CLBIL – over £5m
You will know what your funding need is – doing a cashflow forecast will help you and I strongly recommend you do that just for your own benefit. Also be aware that they are all separate schemes – just because Bank ‘A’ provides CBILS Loans, it doesn’t mean they also provide BBLS Loans – so again, visit their websites, go to the British Business Bank website and do your research.
Can we apply more than once?
Yes, you can. You can apply with multiple banks and pick the deal that best suits you. As previously mentioned, each bank will have its own credit policy and will also have its own pricing – so it becomes a commercial decision for you. Of course, withdraw any outstanding applications with lenders that you do not proceed with.
How long will the process take?
This is a difficult question to answer as different lenders will be in different positions. For example, a well-known high street bank could be flooded with applications therefore will take longer to respond to you. A smaller specialist bank could have more capacity so its turnaround time could be quicker.
The majority of digitally led lenders have an online application process which enhances the experience and will be quicker – but it truly depends on the type of relationship you want from your chosen provider.
At Cynergy Bank you can apply for a CBILS Loan via the website and the entire process is online and digital. Typically speaking, customers are responded to within 24 hours to acknowledge the application and a credit decision is provided within five working days if successful. The time it takes to place money into your account will depend on your individual set of circumstances. For example, if new security is being pledged, a valuation and conveyancing would possibly delay you receiving funds.
What should we do if we are turned down by a bank?
Don’t be disheartened or give up. If you do get declined – ask for the reason. Is it eligibility or credit policy? Either way, get a full explanation from your bank. If your application was declined for credit purposes approach another lender – there are plenty of them out there – it’s likely you will find one that suits your specific needs. Talk to your friends, colleagues, professional partners and don’t be afraid to approach multiple lenders.
The Institute for Family Business (IFB) is the not-for-profit UK family business organisation. Founded by a group of family business owners, the IFB has been supporting and championing family firms since 2001. Bringing owners, managers and experts together to share experiences and ideas, the IFB is at the heart of a community that enables family businesses to thrive across generations. As the champions of family business, the IFB advocates for the sector and raises awareness of family firms’ contribution to the UK economy and communities, in Government and among the public.