COVID-19
Knowledgebase

Duncan & Toplis is here to help and support you through the ongoing challenges presented by the coronavirus pandemic. Whilst this is an anxious time for many, it’s important to know that there is help available.

We are summarising the measures, including eligibility requirements, as they are announced and all details can be found here in our COVID-19 Knowledgebase.

Coronavirus Business Interruption Loan Scheme (CBILS) guidance

One of the first packages of support to be announced for businesses affected by COVID-19 was the Coronavirus Business Interruption Loan Scheme (CBILS).

Delivered by the British Business Bank, this scheme is designed to support businesses in accessing bank lending and overdrafts.

With many companies having to close or reduce their operations as a result of the virus, its impact on the economy and the government’s restrictions which aim to prevent it spreading, companies will be facing major financial challenges. Many businesses will have entered a period of having significantly reduced revenue and will be in need of funding in order to maintain their business until restrictions are lifted.

This loan scheme may help businesses to survive the lockdown period and ensure they are well placed to capitalise on increased trade once the threat of coronavirus has passed.

Below, we’ve set out the following guidance to help you secure the financial help your business needs.

It’s important to remember that this is just one of the measures announced to help businesses affected by coronavirus and there may be other packages more suitable for your business, such as the Coronavirus Job Retention Scheme.

Duncan & Toplis can help you find the right path for your business and assist you in applying for and securing the support your business needs. If you’d like professional advice and guidance from our expert team, please contact us.

Overview

The Coronavirus Business Interruption Scheme is a temporary loan scheme which is delivered by the British Business Bank through the main/secondary banks. It was launched on 23 March to help businesses access financial loans and overdrafts in order to overcome the impact of COVID-19.

The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to small to medium sized businesses.

The government will not charge businesses or banks for this guarantee and the scheme will support loans of up to £5 million in value.

Businesses can access the first 12 months of the finance interest free, after which the government will cover the first 12 months of interest payments.

The scheme will take the place of the Enterprise Finance Guarantee (EFG) and a range of options will be available. This includes business loans and asset finance (with terms of up to six years), overdrafts and invoice finance as well as revolving facilities (with terms of up to three years).

More small firms will now be able to secure government-backed loans under the CBILS scheme after the EC agreed to relax competition rules that had prevented businesses from applying for loans that were classified as “undertakings in difficulty”. Businesses in this category with fewer than 50 employees and a turnover of less than £9m can now apply.

Banks are not able to enforce a personal guarantee on company loans when borrowing up to £250,000 under this scheme.

This scheme was due to close on 20 October, but has been extended to 30 November 2020. This is the final date that banks can approve applications by and the deadlines for businesses applying for the loans from banks are earlier. For CBILS this is 30 September.

How to apply

Based on the experience of similar schemes, there will be a process to follow and businesses will need to be ready to make early applications. There will be an underwriting process, so businesses should also ensure that their financial information is as up to date as possible.

It is key that businesses are finance ready so they should prepare in detail for the application.

Below, we have listed some examples of information and questions requested by banks to process an application for similar finance. Before beginning your application, you should be prepared to provide the following:

  • Full background of the business and the level of impact the coronavirus is having on its performance.
  • The measures being taken by you to ensure there’s adequate cash flow in the business. What contingencies have been put in place with suppliers etc.?
  • What is the business doing to manage expenditure?
  • What additional funding you may require and for how long.
  • Term/structure required (number of months payment holiday required, is it a full holiday or reduced payments. For example, 50%, do you wish to extend the agreement by the number of payments in the holiday or spread over the remainder of the agreement?
  • Other HP or lenders’ positions. Are they the only funder? If not have you approached the other funders and what has been agreed?
  • What other funding options do you have in place? i.e. overdraft options? Formal HP lines.
  • You should make the latest year end accounts, management information, forecasts and a clear understanding of ongoing fixed costs available.

It’s understood that the scheme may be used for unsecured lending for facilities of £250,000 and under. From 3 April, applications were no longer limited to businesses that have been refused a loan on commercial terms. Banks were also banned from asking company owners for personal guarantees when borrowing up to £250,000.

Eligibility

Your business must be UK based and, although businesses from all sectors can apply, the scheme is aimed at smaller enterprises. Therefore, it is limited to companies with an annual turnover not exceeding £45 million.

Businesses must also have a borrowing proposal which, were it not for the current pandemic, would be considered viable by the lender, and for which the lender would believe the provision of finance will enable the business to trade out of any short to medium term difficulty.

Businesses must also meet the other British Business Bank eligibility criteria.

For businesses with a turnover in excess of £45 million, see details of the Coronavirus Large Business Interruption Loan Scheme (CLBILS).

How to access the scheme

The full rules for the scheme and the list of accredited lenders is available here.

All major banks will offer the scheme, with 52 accredited providers in total.

You should speak to your bank or finance provider (not the British Business Bank) as soon as possible and discuss your plan with them. This will help your finance provider to act quickly to support your business. If you have an existing loan with monthly repayments, you may want to ask for a ‘repayment holiday’ to help with your cash flow and ensure you can meet the terms of the facilities.

You may consider going to market with applications for CBILS, so please contact us to see how we can help with this.

For more information, please visit the government website here.


Coronavirus Large Business Interruption Loan Scheme (CLBILS)

On Monday 20 April, the government announced the CLBILS. This scheme enables banks to make loans of up to £200m to firms with an annual turnover above £45m, with a government guarantee of 80%. Businesses are able to borrow up to 25% of turnover, up to a maximum of £200m.

Facilities backed by a guarantee under CLBILS will be offered at commercial rates of interest.

This scheme allows lenders to specifically support businesses that were viable before the COVID-19 outbreak but now face significant cash flow difficulties.

As with the CBILS, banks cannot ask company owners for personal guarantees when borrowing up to £250,000.

This scheme was due to close on 30 September, but has been extended to 31 December 2020. This is the final date that banks can approve applications by.

The deadlines for businesses applying for the loans from banks are earlier.

Eligibility

Your business must be based in the UK, with an annual turnover above £45m.

Certain types of entity are excluded from the scheme, including:

  • banks, insurers and reinsurers (but not insurance brokers)
  • building societies
  • public-sector bodies
  • state-funded primary and secondary schools

How to apply

The full rules for the scheme and the list of accredited lenders is available here.

You should speak to your bank or finance provider (not the British Business Bank) as soon as possible and discuss your plan with them. This will help your finance provider to act quickly to support your business. If you have an existing loan with monthly repayments, you may want to ask for a ‘repayment holiday’ to help with your cash flow and ensure you can meet the terms of the facilities.

You may consider going to market with applications for CLBILS, so please contact us to see how we can help with this.

 

At Duncan & Toplis, we can support you with your applications for funding and help you choose the right path for your business. We can also help you ensure your business is operating as efficiently as possible and that your company is in the best possible position for when restrictions are lifted and life returns to normality.

If you’d like any support or guidance from our team of expert advisers, please contact us.

The information which is summarised herein does not constitute professional advice and is general in nature.  Please contact our team for further detail of how these initiatives could help you and your business.


Duncan & Toplis

Duncan & Toplis was established in 1925 and has 11 offices throughout the East Midlands: in Boston, Grantham, Lincoln, Loughborough, Louth, Melton Mowbray, Newark, Skegness, Sleaford, Spalding and Stamford. The group offers accountancy, tax and business advice, audit and assurance services, HR, Payroll, wealth management, IT services, legal and probate services and provides business turnaround support to SMEs. The business has 413 employees, of whom 65 are currently engaged in professional training.