By Pamela Phillips
The deadline for accessing a government loan is fast approaching. If you think your business will benefit from extra cash or from refinancing existing borrowings then be sure to not leave it too late to apply.
CBILS provides financial support to smaller businesses in the UK that are losing revenue or having cash flow difficulties as a result of Covid-19.
Originally due to close on 31 January 2021, it has been extended until 31 March 2021.
Benefits of CBILS
You may think that the CBILs scheme simply offers standard term loans however there are actually a number of products available under the scheme, some secured on invoices, some on property, and some completely unsecured. They come with a range of benefits rarely available with normal lending including:
- No repayments for the first 12 months
- All fees covered by the government
- No interest payable for the first 12 months
The maximum borrowing requirement is 25% of turnover or 2x annual wage costs, however, multiple loans of up to £250k each can be taken from different providers, with no need for personal guarantees on any of them.
Should you not require the funds, they can be repaid in full before the repayments begin and there will be no early settlement penalty at all.
Who might benefit from a CBILS facility?
Low cash reserves
If you have low cash reserves, whilst you may feel you have sufficient funding to meet your commitments over the foreseeable future, will you be able to manage if there is a disruption to your business and sales reduce?
In order to safeguard, it could be worthwhile applying for a CBILS facility and putting it on deposit. If you don’t end up using it, you can pay it back before the end of 12 months with no cost or risk incurred.
Plans for growth
Whilst you may have a stable business, many clients have applied for CBILs to make use of the preferential terms to accelerate their growth plans, fund marketing initiatives or new assets, and give them additional funds to take on opportunities should they arise.
Tax liabilities to pay
You may have a Corporation Tax liability looming, or the VAT that you deferred from 2020 which needs to be paid soon. Perhaps you’ve already negotiated a Time to Pay arrangement with HMRC. If this is the case then you might need additional funding to cover this. CBILS may provide better terms than normal commercial lending available to you to
Asset Finance and Lease Agreements
If you have HP or lease agreements, they are likely to include personal guarantees. If you would like to investigate whether a CBILS facility could refinance this asset finance, you may find there is a lower rate, no personal guarantees, and no repayments for the next 12 months.
Have you already been declined for a CBILS facility?
If you have previously applied for a CBILS facility with one of the high street banks, but were declined, you may find that the more recently accredited lenders, such as those non-high street finance companies, may be able to meet the British Business Bank criteria using alternative underwriting procedures.
Existing Bounce Back Loan or CBILS facility
If you already have a Bounce Back Loan or a smaller CBILS facility in place, but borrowed less than you were entitled to, you can top up your existing loan to the maximum amount but you must request the top-up by 31 March 2021.
How long is the loan for?
The maximum length of the facility depends on the type of finance you apply for and will be:
- Up to 3 years for overdrafts and invoice finance facilities
- Up to 6 years for loans and asset finance facilities
How we can help
Through our partnership with Capitalise, we have access to 30 of the CBILS accredited lenders, including the banks and lenders who aren’t on the high street.
We know that lenders are taking some time to approve CBILS so please do get in touch soon if you would like us to help with your application.