We have been waiting to hear how the banks will administer the CBILS scheme, although the government support 80% of the debt this only kicks in if the borrower can’t repay so the first call is on you. Given the bank are still on the hook for 20% of the loan, the process is not wildly different from a standard application. The scheme has been described as a potential way to turn a NO from a bank into a YES particularly where there is insufficient collateral.
The information and application process details for CBILS was sent out yesterday by Lloyds, it is well laid out and clear but not easy! I anticipate that the other banks will have very similar processes. It is worth noting you can go to any providor but the process is likely to be easier with your own bank.
- The maximum value of a facility provided under the scheme will be £5m (there are other factors that limit amount)
- The loan scheme is for businesses experiencing lost or deferred revenues
- The scheme provides Lloyds Bank with a Government backed guarantee potentially enabling a ‘No’ credit decision to become a ‘Yes’ decision
- 80% guarantee against outstanding balance
- Finance terms are up to six years for term loans.
- The borrower always remains 100% liable for the debt
- No arrangement fee
- No interest for 12 months.
- After 12-months pricing returns to standard pricing.
- 6 Months Capital Repayment Holiday
- Eligibility criteria is Strict
- Clients must have a sound borrowing proposal, but insufficient security to meet the lender’s requirements
- The CBILS scheme is only available to customers who cannot access other funding due to a security shortfall
- For limited companies, a personal guarantee will be taken for the full amount of the funding requested
Section 1 – Eligibility criteria questionnaire
If you can answer ‘yes’ to all of the following questions, you may be eligible for the government-backed scheme.
All decisions are subject to credit sanction.
- Are you an existing Lloyds Bank or Bank of Scotland customer?
- Is your enquiry for finance as a result of the Coronavirus pandemic?
- Are you a small or medium-sized enterprise with a turnover of less than £45m?
- If you’re borrowing less than £5m in total (including any existing government-backed lending), is this for a maximum of 6 years?
- In the last 3 years, have you borrowed less than £1.2m from the British Business Bank ( i.e. Government backed lending)?
- Does, or will, your business generate 50% or more of its income from selling goods or providing services?
- Is your business based in the UK, and will the loan be used to support trading in the UK?
- Are you applying for a loan in Pound sterling (GBP)?
- You haven’t received any other state aid in the last 3 years?
- Is the main reason for seeking finance to support investment, increase working capital, fund business growth or acquisitions, or to refinance existing borrowing?
Section 2 – Industry eligibility
A small number of industries are not eligible for the scheme. If your industry appears in the list below, you will not be able to apply for a loan through this scheme.
- Banks, Building Societies or Insurance.
- Primary and General secondary education.
- Business and employers membership organisations; trade unions; religious organisations; political organisations, or households as employers of domestic personnel.
- Undifferentiated goods- and services-producing activities of private households for own use.
A full list of eligible and excluded sectors can be found below
If your industry does not appear in the list above, then you may be eligible for the government-backed scheme.
Section 3 – Additional criteria
For facilities with a proposed maturity after 31 December 2020, the facility amount should not exceed:
(a) Twice the annual wage bill of the beneficiary (including social charges as well as the cost of personnel working on the undertakings site but formally in the payroll of subcontractors) for 2019, or for the last year available. In the case of undertakings created on or after 1 January 2019, the maximum loan must not exceed the estimated annual wage bill for the first two years in operation;
(b) 25% of total turnover of the beneficiary in 2019;
(c) With appropriate justification and based on a self-certification by the Applicants of its liquidity needs, the liquidity needs of the Applicant from the moment of granting for the coming 18 months. The Applicant’s liquidity plan may include both working capital and investment costs.
A financially viable client is a counterparty that may at the time of the application be experiencing exceptional financial pressures, but these are seen as temporary as a result of Covid-19, and must not have exhibited signs of financial difficulty pre-dating the outbreak.
We would expect viability to have been evidenced over the course of preferably the three prior years.
- Security Assessment
If you have existing security available to cover the amount of your request, then you will not be eligible for the CBILS scheme. If you are unsure, please ask.
You should then proceed with a Business As Usual application.
- Provide Information direct to your Relationship Director
If you are happy that you are still eligible please provide the following information to me by email.
All requests are subject to formal credit approval and in order to help me deal with any requests quickly I would be grateful if you could respond by email to the following bullet points:
- What core issues have been caused by Covid-19 for your particular business (examples could include lack of sales due to general public not visiting restaurants and bars, Hotel bookings being cancelled, supply chain issues).
- What impact is this having on your business (examples could include reducing staff hours, redundancies, unable to get raw materials / stock)
- What is the financial impact of these issues (cashflow impact, unable to pay creditors / staff)
- What financial support do you require from Lloyds (Quantum if looking for a term loan and / or term of the Capital Repayment holiday on existing term loan facilities that you are looking for)
- How has this amount been calculated?
- What other government schemes are you accessing and what is the financial amount of the assistance?
- What other measures has / is the business taking to try and mitigate the effects of covid-19
- What can / are the shareholders doing to reduce the financial impact (examples could include injecting funds into the business, reducing directors remuneration, restricting any dividend payments)
- Please also supply latest Management accounts and last annual accounts (if I don’t already have them) and any forecasts / cash flows that you have produced to look at the impact of Covid-19