If the Covid-19 outbreak means you face cash flow problems the government is offering the Coronavirus Business Interruption Loan Scheme (CBILS).
It is part of its support for UK businesses and employees and is operated by the British Business Bank via accredited lenders.
The finance comes from the lenders but it is backed by the government as the first 12 months of interest payments and charges will be covered.
There are more than 40 lenders working to provide finance. Of those, four have confirmed that personal guarantees will not be required.
How does it work?
A lender can provide up to £5 million through
- Invoice finance
- Asset finance
- Term loans
The maximum sum of £5 million can be repaid with terms of up to six years. The maximum is three-year invoice finance and overdrafts.
Those who borrow will remain liable for the debt. As we have mentioned, the government covers the first 12 months of interest payments and any charges the lender imposes.
Am I eligible?
Businesses applying for CBILS have to be based in the UK and have a turnover under £45 million.
The business must also have a borrowing proposal which the lender:
- Considers viable were it not for the Covid-19 pandemic
- Believes will enable you to trade out of any short-term to medium-term difficulty
Does the government decide who can borrow?
The lender – that is the bank or finance company accredited by the British Business Bank – has the authority to decide whether to office you a loan under the Coronavirus Business Interruption Loan Scheme.
They may decide to offer you normal commercial terms. Remember, if you are turned down by the lender, you can still approach others in the scheme.
Do I have to give personal guarantees?
Banks usually require a personal guarantee from company directors. This might see assets owned by directors seized if it is not paid back.
Lenders cannot request a directors’ principal home as a personal guarantee from those applying for CBILS.
Some of these lenders are requesting some personal guarantees but Barclays, Lloyds, HSBC and the Royal Bank of Scotland (NatWest) do not request any personal guarantees.
For more details and to apply for a CBILS, visit https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils-2/
If you wish to discuss your options before applying for the loan scheme, then please contact us.