Johan Groothaert

Less than a month left to take advantage of CBILS loans




There is less than a month to go until the scheduled closure of the Coronavirus Business Interruption Loan Scheme (CBILS) on 30th September.

Delivered through the British Business Bank’s accredited lenders, such as Fiduciam, it was designed to support the continued provision of finance to UK SMEs which have been impacted by the Covid-19 pandemic.

The scheme launched on 23rd March through around 40 providers, and was then extended on 2nd  April with three key changes (to be retrospectively applied): insufficient security was no longer a condition to access the scheme; personal guarantees could not be taken below £250,000; and where personal guarantees may be required above £250,000, they were capped at 20% of the outstanding balance after business asset recoveries.

In addition, to accommodate both the volume of lending requested and the number of prospective delivery partners applying to offer CBILS, the British Business Bank set up a new accelerated system for lender accreditation, resulting in just over 100 lenders now able to offer these loans.

The benefits of CBILS for borrowers are significant and Fiduciam received nearly £200m of requests in the month of August, underscoring this strong demand. There are no application fees, early repayment or exit fees, and the government pays all interest payments for a year, in addition to any fees levied by the lender. This means that businesses benefit from no upfront costs, nor finance costs, for the first 12 months, and lower finance costs in many instances thereafter. By way of example, we have been able to lower our interest rates to reflect the guarantee provided by the government. The reduced finance costs are going to be even more vital as the furlough scheme is unwound.

The government guarantee to lenders provided with CBILS is enabling businesses to access finance to keep their operations running at a time when they may not otherwise have been able to. In fact, one of the conditions of the scheme requires potential borrowers or their brokers to state that they have been impacted Covid-19. 

The applicants need to have had a viable business before the outbreak of the pandemic, so the loan will help them through this more challenging period and hopefully help them to achieve bigger and better things when we are back in a more normal trading environment — part of that is having a solid recovery and business plan. It is important to note, however, that under the terms of the scheme, the government guarantee is to the lender, not the borrower, and it is the borrower who is always responsible for the full repayment of any facility. 

As the furlough scheme comes to a close, the next two months will be a crucial time for smaller enterprises, in particular, that may not have the resources they need to start paying all wages in full.  It is vital that advisers use the next week or two to contact all of their clients to see what extra support they need before the application deadline for CBILS ends on 30th September.

 

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