Coronavirus Business Interruption Loan Scheme (CBILS)
FAQs resulting from webinar with Acconomy corporate finance partners
As at 16th April 2020
A: As of today , the answer is yes. However, speaking to the lenders they are saying they need a couple of weeks to get the process up and running and to clear the backlog before looking to lend outside of their customer base. We have some who are happy for you to open an account with them and then apply. I can see this changing over time as in normal times this is seen as an anti-competition stance. As it changes we will notify you.
A: No as of today, with the latest announcement from the Chancellor, any viable business is allowed to apply for CBILS and not have to prove that you couldn’t get a loan under normal commercial terms. The lenders are all busy updating their processes for this change so I would suggest waiting until post April 8th as this is the deadline set by the government to have these changes implemented.
A: If the business is trading for more than one year then it meets criteria number 1. You then need to prove the business is viable/profitable. If you can prove that it was profitable before Dec 2019 and that it is due the Covid 19 impact that it is no longer profitable then that should suffice.
A: The GUIDELINES are 2 x annual wage bill or 25% of turnover. Or 1 x wage bill for a company that is less than one year old.
A: This is a different situation and one everyone needs to be aware of for their clients. On April 6th there is a change in how banks charge businesses and consumers for overdrafts. They are no longer allowed to charge daily fixed fees and must all now charge a straight forward overdraft fee so that business owners and consumers can easily compare. As the previous regime was one of the most lucrative areas for banks to make money they are now hiking up their interest rates to cover this loss. There were calls for them to defer this new hike given the circumstances but it is still going ahead. However applying for an overdraft under CBILS should be more favourable.
A: As of Friday 3 April I can’t confirm this as it is not aligned with the general rules of the scheme so I will need to come back and confirm once the latest changes have been made to take account of the Chancellors new announcement today.
A: The initial ask was to approach your own bank first but there are other non-bank lenders and we believe there will be more added to the scheme over the next week. We believe some of these will be the alternative finance providers and they are more technologically enabled to deal with mass applications and process in 48 hours. So, once they come online there will be some competition. They are currently advising to go to your own bank first so as not to overwhelm the smaller more traditional lenders currently in the scheme. We will notify you when these new lenders are added to the scheme.
A: They are all trying to pass the problem to another as they are inundated with enquiries. Our Partners can help if you would prefer to go via Natwest. This will change. We can put your application to Natwest as we work closely with them if you prefer to Barclays.
A: The government will cover the first 12 months of interest+ arrangement fees.
A: PGs (Personal Guarantees) will only be asked for loans of over £250k. And the lender can only ask for security for 20% of the balance above £250k
A: Yes. Non bank lenders rely on wholesale lines to be able to have the capital to lend. A lot of the lenders funding is only available if PGs are in place. So as the new rules ban PGs for less than £250k they are automatically unable to lend under CBILS but are able to lend under their usual terms.
A: NB. At no point can any lender ever ask a business to put up their principal residence as security under CBILS. So, no they cannot direct you to a loan that suits them. Asset finance would be an option where the business has assets such as plant and equipment..
A: It is for the amount over £250k and not the total loan.So 20% of £50k.
A: By “this” I think you may be referring to furlough. If so then no. They must be temporarily laid off to be able to claim under the job retention scheme.
A:No time limit and no set amount of time for the government to operate this scheme. This is simply a rehash of a scheme that has been in existence for over two decades. The only difference is that the government is paying the first year's interest and the business does not have to pay a fee to the government for being the 80% guarantor.
A: This would be another loan/product and there are still numerous lenders and investors who have an appetite to fund growth projects.These are all available from our funding partners so we can curate a list for you very quickly.
A: The rule is that you must speak to your EFG lender first to ask for this refinance. We believe that in most cases the answer is yes from our client base so far.
A: Management accounts will suffice and make sure it shows positive EBITDA.
A: Unfortunately, no. It has to be a profitable business. However, you may have a R&D claim and if so it may be possible to obtain a loan as an advance on this claim so you can get their return in early with a claim and then get it funded. You may be eligible for a Start Up loan which has 6 months interest free period, no early repayment charges, and up to £25k is available for each founder or director of the business.
A:Yes - it must be shown to safeguard jobs, safeguard the business so that you can re-start the business. so that you can re-start the business when the crisis is over so it will be to cover working capital/normal outgoings.
A: Not necessarily. However, the bank would take that into account.
A: Challenger banks such as Metro are offering CBILS but not the new neo banks like Starling or Monzo. There are no outstanding performers yet! We are keeping a close eye on statistics and will share insights with you as they become available.
A: The lenders are saying if you look at the previous year -did the business have positive EBITDA. If yes - then it is viable.
A: Very good question! It is not clear from the announcements today what the latest covenants will be yet.
A: The rules are that it is not for refinancing (however they seem to suggest they will refinance EFGs possibly) but you can use the loan to cover your cost commitments. The reality is that when an underwriter looks at the debt in total, they may suggest a restructure. So, I don’t rule it out as it is a case by case basis. But don’t apply with that as the principal purpose of the loan.
A: Then it won’t be eligible for CBILS but may be eligible for other forms of finance.
A: Ask for what is needed but be aware that they may ask you to limit this. The amounts they state are guidelines.
A: 2 x annual wage bill or 25% of turnover. Or 1 x wage bill for a company that is < 2 years old.
A: If you can show management accounts to Dec 2019 as profitable then it would be considered. If the bank didn’t lend on it some of the non-bank lenders would consider it.
A: They are eligible as they are profitable.
A: See answer above. Don’t make it the principal purpose of the loan but then the bank will look at your debt schedule and come back with suggestions..
A: For this type of company they are much better off looking at a start-up loan. APR of 6%, 6 months interest payment holiday. No early repayment charges.
A: If the company is a UK company then it should be eligible.
A: Partnerships can apply.
A: The debenture will only be for the rules stated above.
A: Banks are being quite flexible with this requirement as they understand some businesses will be first time lenders and may not be prepared. However, the more prepared the more comfortable the lender is and this type of professionalism actually counts in their assessment of an application. 3 Years is preferred.
A: It is a similar process, but each lender has slight differences - most of it is standardised but for invoice finance the focus will be on aged debtors.
A: We would have to assess the case further to ensure it meets the “50% of revenue must come from trading” rule. We have other lenders who would also suit this if not eligible for CBILS
A: Unfortunately banks can’t accept CSV due to AML reasons. Our partners are able to pass data over to them sourced directly from Open Banking. If the business is profitable then our partners can find other non bank lenders who can deal with this.
A: The guidelines are at least 1 times greater than last year's EBITDA but preferably 1.5 to 1.75 x last year's EBITDA.
A: See above- that is the only affordability criteria being looked at due to the current situation.
A: Yes, you should show that you have factored it into projections at least. The details of the scheme are only becoming available, so they understand this.
A: Provide the accounts from the previous years. But unfortunately, Brexit is still going ahead so they may say this is the new EBITDA norm. But if we can explain the difference then may be more lenient to look at previous years.
A: Not at the moment.
A: The government and lenders have been asked to clarify.
A: or 25% of turnover.
A: I would continue where you are in the process but if you don’t get a response within 1 week then look at alternatives.
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