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March 25th 2020

Coronavirus: business interruption loan scheme (CBILS)

The Scheme is being administered by 40 lenders, including the usual high street names.

It is designed to support businesses that were trading successfully pre covid 19, but are now experiencing problems because of the disruption. We have been told that businesses that would have struggled to attract loan finance pre covid 19 are unlikely to qualify now.

Most businesses with an annual group turnover under £45m may be eligible, though different terms will apply to a small number of sectors including some agricultural and aquaculture businesses.

The amounts being lent vary from £5k up to a maximum £5m and for terms of up to six years. We have heard that banks are retaining the right to vary (ie, shorten) the repayment term.

There is an interest-free period of 12 months; interest is payable after the first twelve months.

Currently, loans are available under CBILS until September 2020, though the Government may extend the term.

The loans are 80% backed by British Business Bank; our expectation is that banks will look for the borrower (or director, via a PG) to provide security too.

HOWEVER a CBILS application form from one of the accredited lenders which we have now seen clearly states that the bank retains the right to recover the full amount - the entire loan - from the borrower. Whilst this does not seem to be in the spirit of the Government's announcement, that is what the application form says. Given the underlying economic risks, those intending to apply for a loan under the Scheme therefore need to tread with caution.

This article from the BBC is also highly critical of the way some lenders are administering the Scheme.

If you are intending to apply for a loan under the CBILS Scheme, the lender will require as a minimum a basic cash flow forecast for your business. Scholes Chartered Accountants can help you prepare a robust forecast for that specific purpose - contact us today for assistance.

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