Coronavirus Business Interruption Loan Scheme (CBILS) 
FAQs resulting from webinar with Acconomy corporate finance partners
As at 16th April 2020

Q:Do we know if lenders are still only taking on their own account holders?

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.

Q: Can a bank still decide to only give you a normal loan instead of a CBIL?

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.

Q: What if the business was in existence for less and obviously the first year 2019 was not profitable, but current year is to be profitable this year?

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.

Q: How much can I borrow?

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.

Q: Santander said that overdrafts would go from 5% to 10%is this correct?

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.

Q: I've seen info from Barclays which states early repayment charges will apply if you pay more than 10% in any year?

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.

Q: Do you still need to approach your bank first, or can you go to the best available?

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.

Q: I tried to use NatWest who we have a current loan with but was told that I need to use Barclays which is my main bank?

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.

Q: How long will the government cover the interest?

A: The government will cover the first 12 months of interest+ arrangement fees.

Q: Do they require personal security for these loans?

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

Q: Are lenders pulling out of the scheme due to the lack of PG cover for sub-£250k loans?

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.

Q: If a business owner has assets will the bank direct them to asset based financing first or can they go straight to CBILS, an example being if an owner has equity in their home would they still be eligible to go straight for CBILS?  

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..

Q: Just to clarify … for loans higher than £250K is the PG 20% of the amount over £250K or is it on the full amount? I.e. for a £300K loan is it 20% of £50K or £300K?

A: It is for the amount over £250k and not the total loan.So 20% of £50k.

Q: If all employees are effectively working from home would a business still be able to apply for this, their VAT is usually a refund so nothing there, PAYE is small as only two employees who are not on enormous wages, the business rates are included in their rent so no reductions as yet? 

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.

Q: Is there a time limit to apply for these loans, is there a set amount that the government is willing to guarantee for the CBILS as a whole?  

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.

Q: Can a business utilise CBILS to fund further expansion& growth? or would this fall under another loan product from the bank? 

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.

Q: What about existing EFG Loans - can these loans get refinanced under CBILS? What about fixed rate bank loans are they entitled to capital repayment holidays and if not, can they get rearranged? 

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.

Q: What if the first financial year ended 31 March and accounts have yet to be submitted to Companies House?

A: Management accounts will suffice and make sure it shows positive EBITDA.

Q: We have been developing products for 2 years with small losses, 2020 was the plan to bring the products to market. Would we be able to apply?

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.

Q: Are there any limits on the use of funds within the company?

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.

Q: If we already have funds will this preclude a loan application being made?

A: Not necessarily. However, the bank would take that into account.

Q: Which are the best banks to use to access the CBILS, are the challenger banks offering these loans?

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.

Q: Viability; Can you provide a cleared definition for this? Some companies, such as hospitality businesses almost operate month to month and on low margins. I am interested in your views.

A: The lenders are saying if you look at the previous year -did the business have positive EBITDA. If yes - then it is viable.

Q: What covenants will be attached to the loans?  

A: Very good question! It is not clear from the announcements today what the latest covenants will be yet.

Q: Because of the circumstances can you use this scheme to clear loans that are at a higher rate that are currently funding business?

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.

Q: What if it hasn't been profitable for 2 years?

A: Then it won’t be eligible for CBILS but may be eligible for other forms of finance.

Q: Should we be requesting how much to borrow based on our forecast CFS i.e. to fund the cash gap, or just go for the 2x annual wage bill?

A: Ask for what is needed but be aware that they may ask you to limit this. The amounts they state are guidelines.

Q: Did you say the maximum loan amount is the higher of 2 x annual wage bill or 2 x annual turnover? 

A: 2 x annual wage bill or 25% of turnover. Or 1 x wage bill for a company that is < 2 years old.

Q: What if the company made a loss last year (March 2020 y/e) but expected a return to profitability without this situation?  

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.

Q: If someone has revenue less than £100,000 and the company made a small profit of £5,000 does this mean they won't get any loan?  

A: They are eligible as they are profitable.

Q: small amount of funding required, but we have existing loans (unsecured) with the bank and we're hoping to roll those in with the additional funding required. The total new balance should have lower repayments than the existing loans due to the term being looked at. Any ideas on how this is likely to be looked at by the banks?

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..

Q: What if it is a start up with one year of trading and the revenue was less than a wage bill for the last year (investment financed)?what criteria would be used in this case?   

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.

Q: Are there any exceptions related to companies within the Onshore Oil industry applying for the loan?   

A: If the company is a UK company then it should be eligible.

Q: Can Partnerships apply? or only LTD Companies?    

A: Partnerships can apply.

Q: Will any loans have a debenture request attached tothem?    

A: The debenture will only be for the rules stated above.

Q: Do banks require a forecast for the next 3 years? And am I right in thinking that it is based on 6 months of COVID-19 impact and then back to normal trading after 6 months?    

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.

Q: Is there a different application process for Invoice finances & overdraft?  

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.

Q: Do property rental companies’ class as trading for this?

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

Q: One of the high street banks is refusing to accept Revolut statements issued/ downloaded from the app in CSV format. What should we do in this case?

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.

Q: Are there any Cash Flow Available for Debt Servicing (CFADS)criteria?

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.

Q What about any Debt servicing requirements?  

A: See above- that is the only affordability criteria being looked at due to the current situation.

Q: CJRS (Corona Job Retention Scheme) - do we need to show we’ve already availed of it, or that we are factoring it into projections?  

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.

Q: Affordability - what if 2019 was unusually poor by virtue of Brexit?   

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.

Q: Am i able to apply for and receive more than one CBILS loan?

A: Not at the moment.

Q: If someone gets a CBILS loan and realises in a few months that it is not enough, are they able to apply for another one or a top up?

A: The government and lenders have been asked to clarify.

Q: Are alternative lenders going to be removing the requirement for a PG, or is it just the ‘high street banks’ that this will apply to?

A: All.

Q: What if you are in the recruitment process for a candidate to support a growth plan can you include that person's salary in your annual wage bill forecast?  

A: No.

Q: The suggested funding amount asked for is 2 times the annual wage bill, or 50% of what?

A: or 25% of turnover.

Q: If I have applied through my bank can I seek an alternative source of finance?   

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.

For further information contact:
Nigel Simmons
CEO Acconomy Limited
Phone: +44 1202 678 993

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