The CBILS is a government-backed loan scheme, providing loans, overdrafts and other forms of finances to businesses with cash flow issues as a result of coronavirus.
CBILS is available via 40 lenders, including high street banks, and is ultimately managed by the British Business Bank. The government are stepping in to ensure that banks are lending money to businesses that otherwise wouldn’t qualify, and the government are also dictating the terms to ensure the finance is business-friendly.
The banks are able to offer a variety of products, such as loans, overdrafts, invoice financing or asset financing. For most service businesses loans and overdrafts will be the first port of call. The key features of coronavirus business interruption loans are:
- No fees
- Interest-free for the first 12 months
- Loans periods up to six years, overdrafts up to three years
- No personal guarantees required for loans up to £250k, meaning the liability stops within your company
- Loans available up to £5m
- Interest rates on loans less than £250k is typically 5% or less.
The exact details vary from lender to lender – for example, some have lower interest rates, whilst others offer the first year free of loan repayments.
We understand that many lenders will first look if other products would be more suitable for your needs, which may or may not be more attractive to you. It may be, for example, that they can offer you an overdraft at a lower interest rate without having to access CBILS. CBILS products are particularly attractive due to a year interest-free, and no personal guarantees required – be sure to compare any offer a lender gives you. And remember, there are over 40 lenders offering CBILS products, so it could pay to shop around.
Should I take out a loan?
Everyone’s circumstances are unique, meaning there is no simple answer. Some questions you may wish to ask yourself are:
- What exactly do you need the cash for?
- How can you achieve what you need without taking on additional debt?
- Have you looked at your cash flow forecast for opportunities to improve your position? Have you been aggressive enough?
- Can you take advantage of other support mechanisms such as VAT deferrals?
- Can you ask clients to reduce payment terms, or consider paying part of your invoices in advance?
- What is your plan to service the debt? What risks are there in your plan?
- Will your market return in line with your expectations?
- Is your venture worth saving, or would a loan simply result in kicking a can down the road?
- Or could you use the finance to your advantage and invest in business development whilst the market is quiet?
The British Business Bank only want CBILS to be used if every other government relief option has been used, i.e. VAT deferral, Coronavirus Job Retention Scheme, time to pay, etc. We understand you’ll need to produce forecasts for your application which show these schemes in use.