Coronavirus Business Interruption Loan Scheme: The Devil is in the detail

By now everyone will be familiar with the Coronavirus Business Interruption Loan Scheme (CBILS). However businesses should bear in mind that the scheme is complex and was created at very short notice and has many traps for the unwary borrower.

The key things for borrowers to realise are:

• CBILS offerings differ substantially from lender to lender: it is worth carefully reviewing different offerings and ensuring you’re comparing apples with apples
• All lenders will require borrowers to be responsible for repayment of 100% of the loan facility –  not just the 20% that is not guaranteed by the government and, where defaults occur, will follow their “standard commercial recovery processes” – CBILS is by no means a grant or “free money”
• Borrowers will be asked for a lot of financial information and they should engage fully with their accountant as quickly as possible

A key point that many have missed is that loans via CBILS are limited to:-

• A maximum of 25% of 2019 turnover; or
• Twice the annual wage bill – whichever is greater.

he key message we’re hearing from our contacts with commercial lenders is that the lenders are asking themselves: “Would I have lent to this business last year?” and if the answer is “No”, then they are rejecting the application quickly.

Lenders will be basing their credit views on the forthcoming business performance in 2021 and 2022 and on the performance of the business prior to the onset of the coronavirus epidemic, and how the business is planning to deal with the longer-term disruption.

Borrowers who work closely with accountants and are able to provide this information to lenders will stand a much higher chance of receiving CBILS funding.”