How to apply for the new Coronavirus Business Interruption Loan scheme to help small business survive during the COVID-19 outbreak.
How do I apply for a Coronavirus Business Interruption Loan?
The Chancellor announced a new temporary Coronavirus Business Interruption Loan scheme, as part of a package of measures to help small business.
British Business Bank ( https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/ ) will deliver the loan scheme.
The loan scheme is available from 23rd March and it is to support small and medium businesses to access bank lending and overdrafts which, in normal circumstances, they many not be able to obtain. Interest rates will be similar to current bank lending.
The government will provide lenders with a guarantee of 80% of each loan.
And the government will cover interest payments on the first twelve months (this was 6 months but was announced on 20th March that this has now changed to 12 months) of the loan, making it interest free for that period.
Capital will still have to be paid and the debt is fully repayable by the business.
The scheme will support loans of up to £5m per small business.
The idea is to give lenders more confidence in approving credit decisions for small businesses that have insufficient security to meet the lender’s normal requirements.
More than 40 lenders including the big four banks — Barclays, HSBC, Lloyds and RBS — provide funds under the scheme as either loans, overdrafts or asset-based lending secured on equipment or invoices.
Finance terms will be from three months up to 10 years for term loans and asset finance and up to three years for revolving facilities and invoice finance.
Lenders will not charge small businesses or banks for this guarantee.
Is your small business eligible for a Coronavirus Business Interruption Loan?
To be eligible for support via CBILS, your small business must:
- Be UK based, with turnover of no more than £45 million per annum
- Operate within an eligible industrial sector (a small number of industrial sectors are not eligible for support or subject to limitations)
- Be able to confirm that they have not received de minimis State aid beyond €200,000 equivalent over the current and previous two fiscal years
- Be unable to meet a lender’s normal lending requirements for a fully commercial loan or other facility, but would be considered viable in the longer-term
It is important to remember with any loan that it does need to be paid back.
Any decision you make on lending needs to be done with the longer term in mind, as well as getting through Coronavirus in the shorter term. Decisions on leading should be made strategically.
UPDATE 23rd March 2020
We found out today that HSBC are requiring Directors guarantee’s for these loans – we have asked HSBC if this is a policy that they have imposed or if it is one on all loans within this scheme and as yet they have failed to comment. This could mean that many business owners are not willing to take these loans and they are not the help that was suggested when the announcement was made.