When the Cornoavirus Business Interruption Loan Scheme (CBILS) was first introduced, it was seen as welcome financial assistance for many small businesses.
£330bn being set aside by the government to back banks in providing businesses with additional finance to see them through this difficult period.
However, as full details emerged, the CBILS scheme contained a few fundamental flaws:
- The full debt was still recoverable by the bank from the borrower - depsite the government offering a guarantee of 80% of the loan value behind the scenes. Clearly not in the spirit of what was initially intended.
- This, coupled with the fact that large amounts of personal guarantees were being asked for - meaning not only could your business assets suffer, but your private assets (excluding your main house) could also be taken from you if you defaulted on the loan.
As a result, as of 3 April 2020, a measly 983 businesses have succesfully accessed the loans, despite nearly 130,000 enquiries. Only £90m of CBILS loans approved, plus £1.9bn of corporate finance for larger businesses, out of a pot of £330 billion.
That's just 0.6% of the total pot.
Not a great uptake, by any yardstick.
What's changed?
The new measures introduced by Sunak yesterday are:
- Lenders are now banned from asking for personal guarantees for loans under £250,000
- Personal guarantees will be limited to just 20% of the total loan outstanding - much more like we expected, with the bank recovering the other 80% from the government, if things go sour.
- Note though, that business assets will still be as available as security. The new limit only applies to personal assets on the outstanding loan, after business assets have been utilised!
- Insufficient security is no longer a condition to access the scheme, i.e. previously businesses who had assets available as security were being refused access to this scheme, but were being pointed towards a more general commercial lending facility. This is no longer the case.
- The government has asked lenders to be reasonable with interest rates charged under this scheme. There had been reports of rates as high as 30% APR being offered!
These very-welcome new measures go live from Monday 6 April 2020.
What do I need in order to claim?
Fundamentally, the business still needs to have been viable if it were not for the disruption caused by Coronavirus.
You can then apply to one of the 40 approved lenders. Note: there are other lenders going through the accreditation process, so this list should continue to increase.
These are all things which we're able to help you with.
In order to apply, you will be expected to be asked for the following:
- Management accounts and historic accounts
- Business plan - showing the viability of the business being able to trade out of this situation long-term
- Cashflow forecasts - again, confirming the details behind your business plan
- List of your business assets - so the lender can assess the security available
These are all things which we're able to help you with.
Even if you're not yet a client, we're going to be prioritising our work to help all businesses who most desperatley need financial assistance at this time.
If you want to have a free discussion regarding your situation, please feel free to contact us today!
Ultimately, we want to see you succeed long term!
