Coronavirus Business Interruption Loan Scheme (CBILS): Key considerations for businesses

Eligible firms with a turnover of up to £45 million per annum will now be able to access loans of up to £5 million, interest free for the first 12 months, to provide working capital to help them weather the storm. Find out more in our original breakdown of terms, here.  

Realising your business is eligible, however, is just the first step. Mills & Reeve mid-market specialists and partners, Ryan Hawley and David Varnham, expand on what businesses should keep front of mind when applying: 

• Use your existing financial relationships. 

The loans will be deployed through banks rather than directly from central Government. The 40+ accredited lenders are already reporting a very high level of demand and inevitably, with finite resources, they will prioritise their existing clients. While applying via another bank is allowed, using your existing relationship bank (where this is accredited) should streamline the process and increase the chances of the loan being made quickly.  

• It may not be a quick process.

While banks may be able to extend overdrafts quickly, other products such as term loans and asset finance are likely to take longer to deploy.  Banks are aware that the need for funding is now critical and in our experience they are throwing resources at the scheme to help businesses as best they can.  However, borrowers do need to factor in time for banks processing the applications.  We understand that where timing is especially tight increases in overdrafts are being put in place with a view to finding a more suitable medium term solution in a few weeks or months.

• Bear in mind that this isn’t a complete fix. 

Taking on additional debt (even if interest free for 12 months) is unlikely to solve problems where there has been a sudden and significant loss in revenue. Debt can bridge immediate liquidity issues but it ultimately needs to be repaid.  In most cases debt will need to be brought in alongside some of the other schemes now available to either defer or eliminate financial liabilities, including the Job Retention Scheme and the VAT Deferral scheme.

• Bring in external advisors for a thorough application. 

Even though pressures are mounting for businesses to access cash, quickly, banks will still require their processes to be followed. Businesses that apply rigour at the initial application stage are more likely to have success: a quick email to your relationship director is unlikely to be enough. A thorough application, outlining the business plan for the next two or three years as well as mapping out past performance will be required – a debt advisor, accountant or banking lawyer may be able to assist you with this. A firm is more likely to gain funding (or at least secure it quickly) if it can highlight strong business performance right up to the past few weeks, only seeing a downturn and risk escalate due to coronavirus' impact so that should be the main thrust of any application. 

The CBILS has the potential to be a lifeline for many businesses. Early communication with your bank and ensuring that they have all of the information they need in order to process the application quickly and efficiently is critical.