The CBILS scheme, which was introduced formally w/c 23 March, has been amended in several ways following calls from business groups for the scheme to be more comprehensive, less bureaucratic and quicker to access. These changes to the scheme’s features and eligibility criteria mean even more smaller businesses across the UK, which have been impacted by the crisis, can access the funding they require.
Nick Johnson, Corporate Finance Partner at RG, said:
“Whilst the government backed CBILS was launched with the very best of intentions the initial delivery of the scheme has been somewhat problematic with confusion around eligibility, process and the level of personal guarantees that might be required. These changes to the scheme are most welcome – it is not now limited to those businesses that could not get a loan through other means and the clarification around the personal guarantees should help, particularly for the smaller loans up to £250k.
The banks have received a lot of criticism but the truth of the matter is that they have wanted to help – it was simply that the scheme needed some changes to make it more practical for them to employ effectively where needed.
We certainly hope to see more funding support getting to the businesses that need it, when they need it. We are sure the changes will be welcomed by the SMEs that we are working with and that form the backbone of the British economy.”
The changes are summarised below:
- Lenders are now prohibited from requesting personal guarantees on loans under £250k;
- For loans over £250k, personal guarantees may still be required, at a lender’s discretion, but recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied;
- A Principal Private Residence (PPR) cannot now be taken as security to support a personal guarantee or as security for a CBIL backed facility;
- CBILS has been extended so that it covers all small companies who are impacted by coronavirus, not just those for whom other forms of commercial funding was not available; and
- A new scheme has been introduced for firms with annual turnover of £45m to £500m (the Coronavirus Large Business Interruption Loan Scheme – CLBILS), providing loans of up to £25m which will be covered by the government backed partial guarantee of 80%.
These changes should be retrospectively applied by lenders for any CBILS facilities offered since 23 March 2020. For any commercial (non-CBILS) facilities offered since the same date, providing the borrower meets the CBILS eligibility criteria, lenders have been asked to bring these facilities onto CBILS wherever possible (e.g. where the lender is accredited to offer the same facility through CBILS) and changes retrospectively applied as necessary.
All other key elements of the CBILS remain in place including:
- Up to £5m facility;
- Interest and fees paid by the Government. for the first 12 months;
- The borrower remaining 100% liable for the debt; and
- Lenders being able to set interest rates at their discretion.
Our previous article on CBILS details the elements of the original scheme. https://ryecroftglenton.com/2020/03/26/coronavirus-business-interruption-loan-scheme-cbils/
At this difficult time, you may benefit from external support to manage the workload and to smooth the process with your funders, including assistance in the following areas:
- Preparing a proposal / business plan for the funders;
- Preparing or reviewing an integrated financial forecast;
- Approaching and liaising with the funders; and
- Project managing the process at this challenging time for your business, enabling you to focus on your business.
RGCF has significant experience of the funding world and how to successfully raise funding, in good times and bad. If you would like to discuss this further, please contact:
Nick Johnson
CF Partner
nickjohnson@ryecroftglenton.com
07494 076 953
Alex Simpson
CF Senior Manager
alexsimpson@ryecroftglenton.com