What is CBILS?
CBILS is the Coronavirus Business Interruption Loan Scheme announced by the Chancellor in the budget on 11 March 2020 to help Small and Medium Enterprises (SMEs) during the interruption caused by the COVID-19 pandemic.
CBILS is a scheme that can provide facilities of up to £5m for smaller businesses across the UK who are experiencing lost or deferred revenues, leading to disruptions to their cashflow. CBILS supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance facilities. The scheme provides a guarantee to lenders of up to 80% of the loan amount potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’.
Am I eligible for CBILS?
You will be eligible for the CBILS if:
- The loan is to be used for business purposes;
- Your business is based in the UK with annual turnover less than £45m;
- Your business generates more than 50% of its turnover from trading activity;
- The CBILS backed facility is to be used to support primarily trading in the UK;
- You wish to borrow up to £5m, and;
- You have a borrowing proposal which, were it not for the COVID-19 pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable your business to trade out of any short-to-medium term difficulty
What are the key features of CBILS?
CCBILS guarantees facilities up to £5m available on repayment terms of up to six years for term loans and asset finance. For overdrafts and invoice finance facilities, terms are reduced to three years. The scheme provides the lender (not the borrower) with a government- backed guarantee against 80% of the outstanding facility balance.
The guarantee potentially enables a ‘no’ credit decision from a lender to become a ‘yes’.
The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees. Therefore, smaller businesses benefit from no upfront lender costs and lower initial repayments.
It’s important that you are aware that you, the borrower will always remain 100% liable for the debt. The CBILS guarantee is to the lender, not the borrower.
Will I be required to offer security for the loan?
Insufficient security is no longer a condition to access the scheme.
For all facilities, including those over £250,000, CBILS can now support lending to smaller businesses even where a lender considers there to be sufficient security, making more smaller businesses eligible to receive the Business Interruption Payment.
No personal guarantees for facilities under £250,000. Some lenders have confirmed they will not seek personal guarantees for any loan size.
Personal guarantees may therefore still be required, at a lender’s discretion, for facilities above £250,000, but they exclude the Principal Private Residence (PPR) and recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied.
Will my current lender offer me access to CBILS?
Yes if they are an approved lender in the CBILS scheme. You can approach your current lender who will inform you of their application process. Lenders are happy to take applications directly from their customers. Making a direct approach to a Lender without engaging an advisor will lower your costs of arranging a CBILS loan.
Can I apply for CBILS with another lender if my current lender refuses?
Yes. The lending decision is solely that of the Lender not that of the government or the British Business Bank. Different lenders have different risk appetite and may accept your proposal where your current lender may not. Different lenders will apply different pricing, terms and conditions to the loans, and you may wish to consider other lenders before committing to any facility agreement.
I am getting other kinds of aid to help respond to COVID-19 – can I still get a loan?
Yes. The eligibility criteria for CBILS does not require Lenders to take into account the other forms of government support that SMEs may be benefiting from e.g. business rate reliefs or grants unrelated to the CBIL scheme. However, we expect that lenders will look for applicants to make full use of other government support as part of their business plan.
Can Shaw & Co help me with my CBILS application?
Yes, if you are looking to apply for between £150,000 and £5m we can support you in that application. If you are a larger business (turnover greater than £45m) seeking support we can also help, refer to our larger business pages.
What are the benefits of asking Shaw & Co to help me with my CBILS application?
The CBILS process is built around the framework of the Enterprise Finance Guarantee Scheme (EFG) of which we have significant experience. From this experience we know that applications will not be straight forward and will be subject to each lender’s credit procedures. Despite the partial guarantee, the Lender will remain at risk for at least 20% of the loan and possibly more subject to per Lender total limits. For this reason, your application will need to meet certain standards.
Our CBILS application support service has the following benefits:
- Right first time. We have been working with the major lenders to understand exactly what information they need to process your application. We can help you provide all the information your lender needs, in the format that they need so that your application can be processed quickly.
- Maximise support. Make sure your plan maximises the support offered by the government. We have a working knowledge of the Coronavirus Job Retention Scheme, VAT deferrals, Time to Pay arrangements, rates relief and other initiatives.
- Robust forecasts. Whilst forward looking financials are no longer insisted upon to qualify for a CBILS loan we believe lenders, in most circumstances, will still want to evidence that the level of loan sought will meet the expected liquidity gap, as this also form part of the eligibility assessment. Your forecasts will always be your own, we can advise you on the revenue deferrals and cost mitigations that Lenders consider reasonable and acceptable when presenting your projected cashflows as part of a robust financial model.
- Repayment plans. We can help you set out a business plan that will be acceptable to the lender to meet the repayments. In the current environment what is a sensible plan that your lender will accept? – We can help.
- Negotiate security. Loans over £250,000 backed by the CBILS will require security. We can help you negotiate the structure of this security with your Lender and its interaction with existing facility providers to make sure that your exposure is minimised as far as is practicable particularly in relation to Personal Guarantees.
- Navigate the market. New lenders are being approved by the British Business Bank under CBILS. Many are already known to us and we are quickly getting to know those that are not. We can help you navigate quickly to the most appropriate alternative lenders.
- Resource allocation. You may have more pressing things you need to deal with in your business that you cannot outsource. We can manage much of this process for you.
- Coaching and support. We are helping many businesses with their applications and we are covering multiple lenders. We can share our experience to support and coach you through their specific requirements.
What fees will Shaw & Co charge?
We recognise that these are very stressful times for businesses, and we want to help, but we must be a viable business ourselves to do so.
We are offering to help with your CBILS proposal in return for fees as follows:
- For CBILS proposals to incumbent Lenders, our Success Fee will be 1% of funds approved; which is one third (67% discount) of our normal fee for arranging loan facilities; and
- For CBILS proposals to Lenders other than your incumbent, our Success Fee will be 2% of funds approved; which is two thirds (33% discount) of our normal fee for arranging loan facilities.
Other than a Commitment Fee set out below, our fees are fully contingent on successful loan approval.
We will ask for a Commitment Fee of 10% of the projected Success Fee. This fee must be paid in advance of commencing work on your proposal. Success Fees are reduced by Commitment Fees already paid.
Our minimum Success Fee is £2,500 for incumbent Lenders and £5,000 for Lenders other than your incumbent. We do encourage those applying for loans of less that £250,000 to explore the support that your Lender can offer in the first instance, although we are happy to help if your requirement is greater than £150,000 and our minimum fee is acceptable to you.
Why does Shaw & Co charge a higher fee if I want to apply to a different lender?
We anticipate that the majority of businesses will prefer to work with their current Lender. We also anticipate that Lenders will prioritise their own customers. Therefore, we have minimised our fee as far as possible to accommodate the majority of cases.
However, if you wish to explore any of the 39 other approved Lenders because:
- Your application has been denied;
- Your current Lender is unable to process your application quickly, or;
- You wish to explore alternative terms and rates
We are able to support you in doing this and have access to representatives at each of the 40+ approved Lenders. We can market the opportunity for these Lenders to provide a CBILS facility to your business, but this takes more time and resource for which we need to charge an additional fee.
Why does Shaw & Co charge a Commitment Fee?
Our standard practice within our business is to charge a commitment fee. This is an exchange of value that ensures that you are committed to working with us and us with you. We will invest a significant amount of time helping you with your CBILS business proposal and application process and we need to ensure those that we are working with meet our level of commitment to securing funds.
Is the Commitment Fee refundable?
Yes. In the event we will decline to proceed following full assessment of your business case we will refund your Commitment Fee. The Commitment Fee is otherwise non-refundable in all other circumstances excepting non-performance of our service commitment to you.
Given the anticipated high number of requests for support, we shall only move to full assessment of your business and proposal after engagement terms are agreed and the Commitment Fee is received.
We may decline to proceed if following our post engagement assessment, we believe that you will not be eligible for CBILS for a technical reason or that a borrowing proposal, despite our input, is unlikely to meet the standards required by a Lender. Our post engagement assessment will be completed within three business days of receiving the information requested of you. Any Commitment Fee refunds will be processed within two working days.
How quick is the process from application to receiving funds?
This process is as yet untested at volume. We anticipate a three to four week application and decision process. This time frame will be determined by the resource available at the Lenders to process credit applications and the quality of the proposals put to them. Our service is designed to minimise the time to receiving funds as much as is possible by supplying the Lender what they need in the format they need straight away.
When do I pay the Success Fee?
The Success Fee is due within five days of the facility agreements being entered into by you.
If I decide to not draw down on the funds, do I need to pay the Shaw & Co Success Fee?
Yes. You need to pay our Success Fee if the loan agreements are entered into by you even if the funds are not drawn, for example by way of an undrawn overdraft. You may also choose to delay entering into loan agreements for many reasons. However, we will have dedicated significant resource in getting to approval of your facility. We will speak to you about receiving our fee in the event of a delay for genuine reasons, rather than an objection to terms, so that we can fund the resource to go on and help others.
Are there any other fees payable?
You may require support from your lawyer or your accountant in meeting the requirements of the CBILS process. This may incur additional fees which you will need to pay. Any amount paid to Shaw & Co shall not be reduced by any other fee payable by you.
Does Shaw & Co receive any commission from Lenders or payment from the government?
No. Shaw & Co does not receive payment from any party other than its clients. We are proud of and fiercely protect our independence so that we may advise you free of any conflict of interest.
Would you like Shaw & Co to help you apply to the CBILS scheme?
If you would like Shaw & Co to help you with a CBILS application, please click here.