CBILS applications – your questions answered
Last updated 28 April 2020
The Coronavirus Business Interruption Loan Scheme (CBILS) has been one of the bedrocks of government support to businesses. Guidance surrounding the scheme has changed since it was first introduced and has been updated regularly.
John Walsham, a consultant at Kreston Reeves and former commercial banker answers your questions on CBILS.
How do I apply for a CBILS loan?
The British Business Bank facilitates CBILS via its panel of over 40 approved lenders including the recent additions of Co-operative Bank, Cynergy Bank, Funding Circle, OakNorth Bank and Starling Bank.
You will need to find the most appropriate lender for your circumstances and then approach them to apply. Not every accredited lender can provide every type of finance available under CBILS, and the amount of finance offered varies between lenders. Your usual advisers should be able to help you with this process, including the materials needed for an application, alternatively our Kreston Reeves Funding team will be happy to help you with this process. The lenders’ websites will also have further information on the amounts they are able to offer.
I am preparing my cashflow forecasts for my application for CBILS. How long should I forecast for, particularly as I do not know when I can expect the lockdown to end?
Most lenders will require at least a 12 month cashflow forecast and this is prudent considering it is not known when the lockdown will end. It is important to not only consider the immediate cashflow challenge but also the effect on your working capital needs when the lockdown is relaxed or ended.
I have a requirement to increase the funding to my business and have always used an overdraft. Should I just increase that instead of CBILS?
Increasing the overdraft is a possible solution but this is good opportunity to review other ways you can fund your business via term loan facilities, asset/invoice finance which are all eligible for CBILS.
My current lender is not a provider of CBILS. Can I approach another lender?
There are over 40 accredited lenders for CBILS and they are listed on the British Business Bank website. They can be approached directly or via a broker. Alternatively our Kreston Reeves Funding Team can explore the options for you.
I want to apply for a CBILS and think I need £300k but could get by on £250k to avoid giving a personal guarantee. Is that a sensible approach?
You should always request the funding that your worst-case projections have identified. Personal guarantees are not required for borrowing below £250k but remember, irrespective of whether you provide a personal guarantee or not, you are still liable for 100% of the funding you receive.
I have applied for CBILS but my lender has existing security pledged by me and wants to provide a traditional loan rather than CBILS. What is the best option?
So long as you meet the British Business Bank eligibility criteria then you are entitled to be considered for a CBILS facility. The bank may offer you an increased facility against the existing security for a number of reasons, including speed of delivery, interest rate margin, or term of facility (up to 20 years compared to maximum six year under CBILS). You should request both options so you can decide what is best for you and your business.
I have applied for a CBILS facility but have an international parent company/linked company. How will this impact my loan request?
You may will still be eligible for CBILS if you are trading in the UK; have the core of your business operations in the UK and will use the loan facility to support your business activity in the UK. The same is true for an SME which has UK ownership but is registered abroad.
I have applied for CBILS and the interest rate proposed seems high. How do I know if I am getting the best rate?
Each borrowing request will have perceived risks for the lender and therefore you can expect this unsecured facility to be priced according to those perceived risks. Currently, we have seen clients receiving funding (not asset or invoice facilities) at between 3% and 6% above current base rate.
I have applied for CBILS and it has been agreed at a variable rate, but I am concerned that the base rate may rise and increase my costs.
You can explore with your lender a fixed rate CBILS facility so you can compare the pros and cons. You can expect the fixed facility to be more expensive on day one.
I think I can afford the repayments on the three-year CBILS loan I have been offered, but should I consider a longer term?
You can borrow for up to six years on most CBILS facilities and remember there are no early repayment penalties so consider a longer term to give you greater flexibility. The interest rate margin on CBILS loans over three years will tend to be 0.5% higher
I have been asked to provide a personal guarantee – what could this mean in reality for me?
Careful consideration needs to be taken as whilst the CBILS is Government backed at 80% of your loan, borrowers remain fully liable for the debt. There could be serious implications for business owners should the business not be able to repay the loan. In the event of your business failing and you default on your loan, the lender will first look to realise all other available collateral provided to support your loan before they make a demand on any personal guarantee.
My current lender has declined my CBILS request. Can I apply to another lender?
There are over 40 accredited lenders for CBILS and they are listed on the British Business Bank website. They can be approached directly or via a broker. Alternatively, our Kreston Reeves Funding Team can explore the options for you.
Can borrowing under CBILS be restructured at a later date?
Yes and you may wish to do this after the expiry of the first 12 months beneficial term for a number of reasons including reducing the overall interest rate payable; reducing your repayments by extending the loan term.
Can CBILS be repaid early?
Yes all variable rate CBILS have no early repayment charges. If you are considering a fixed rate CBILS then check the documentation thoroughly before signing as there may be an early repayment charge.
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