We are only a matter of days into the Coronavirus Business Interruption Loan Scheme (CBILS). And to say there is confusion in the business world would be an understatement. Illustrated below are a few key points:
CBILS is the replacement for the Enterprise Finance Guarantee Scheme (EFG) and all those EFG lenders switched to CBILS lenders.
Not all the accredited lenders can provide loans and overdrafts as the scheme also covers asset and invoice finance. It appears asset finance companies cannot provide refinance of existing assets, but can provide facilities for those still acquiring assets.
Many thought this was a rescue package for SME clients. Quite simply it is not and the customer is 100% liable for the loan. The government covers 80% of the lender’s loan. In the case of default, the government expect the lender to have pursued every avenue to collect the debt outstanding. And must evidence this before trying to claim their 80% back.
Applications must contain a comprehensive package of financial information. Including: accounts, MI and forecasts along with a report explaining, in detail, how the business can survive the crisis and prosper when they get the all clear.
Some of the lenders have said they will only use CBILS to assist their own clients.
Lenders have been overran with loan applications already leading to delays. This doesn’t bode well as the mountain of applications continues to rise.
We know that loss making businesses will not be in consideration. And clients must evidence two years of profits in the their annual accounts.
The only real advantage to clients is no set up fees and no interest for the first 12 months.
Director’s guarantees are a pre-requisite and for larger facilities, additional security is a requirement.
Taken from the website of the British Business Bank, the administrators of the CBILS scheme, it states that one of the eligibility tests applicants must evidence is:
‘Have a borrowing proposal which, were it not for the current pandemic, the lender would consider viable, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty. Please note: If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.’
Time is of the essence, and many SME clients can’t wait for CBILS. There is no guarantee their application will get approval, and the delay could cost them their business.
So, what options are there?
Business Loan Providers:
there are several loan providers currently accepting new proposals.
Asset Refinance:
If clients have existing business assets, i.e. vehicles, plant, machinery and equipment, it could be possible to release equity from these assets. We have a facility where repayments are only the interest over the first 12 months, with options then of a three, four or five year term. A bullet repayment after 12 months is also available. These facilities can get approval within days and funds released shortly afterwards.
Invoice Finance:
we have a large and diverse panel who cover most sectors. Some of these can be with additional loans to quickly release funds into the client’s cash flow. We also have arrangement of fast-track facilities with providers that can be set up within seven days.
At present PMD has access to two CBILS backed loan providers. Who are available to support transactions that either sit outside of bank scope or require faster turnarounds. We have also been notified that a number of other funders who we deal with have applied for CBILS accreditation. We’ll update you with any further developments.
We are available to consult with your clients and support them in attracting the quickest and most appropriate funding solution for them. In these times of uncertainty our consultative approach is a refreshing change to the other options out there.
The Coronavirus Business Interruption Loan Scheme (CBILS) is managed by the British Business Bank on behalf of, and with the financial backing of the Secretary of State for Business, Energy and Industrial Strategy (BEIS). British Business Bank plc is wholly owned by HM Government and is not authorised or regulated by the Prudential Regulation Authority (PRA) or the Financial Conduct Authority (FCA). Full details on CBILS and the list of participating CBILS lenders can be found on the British Business Bank website at: www.british-business-bank.co.uk/CBILS