CBIL significantly expanded

Coronavirus Business Interruption Scheme (CBILS) – Version 2…

Coronavirus Business Interruption Loan (CBILS)– Version 2!

News from the British Business Bank that administers the Coronavirus Business Interruption Scheme (CBILS) as they make amendments to the scheme to benefit more smaller businesses across the UK

Some key points that have changed

  • Personal Guarantees (PGs) cannot be taken on facilities below £250k
  • Insufficient security is no longer a condition to access the scheme
  • PGs may be needed for facilities over £250k but capped at 20% of the outstanding balance after business assets recoveries
  • Lenders to retrospectively apply changes

It’s worth noting how the CBILS scheme has evolved over the past few weeks. It was first announced in the budget on 17th March, with the scheme going live on 23rd March so just a week. Following applications to the scheme the big four banks also took the decision to remove PGs from facilities below £250k but other lenders still required them. Now the chancellor has made further amendments to the scheme which will come into effect from Monday 6th April.

Since the launch of the scheme the British Business Bank has said that almost 1,000 facilities with a loan amount of £90.5mil have been approved by accredited lenders.

What if I already have a CBILS loan?

Lenders are being asked to retrospectively apply the changes to the scheme for any successfully completed CBILS loans

What if I accepted a Commercial Facility?

If businesses were offered and accepted a Commercial facility, then lenders are being asked to move those facilities onto CBILS. This is providing that the borrower meets the CBILS criteria and that the lender is accredited to offer the facility.

What happens if a lender turns you down?

If one lender turns you down for the scheme you can still apply to other accredited lenders. If you were previously declined through the initial CBILS scheme you should consider re-contacting your lender.

Am I eligible for CBILS?

Your business must:

  • Be UK Based in its business activity
  • Have a turnover of less than £45million
  • Have a proposal that is considered viable, were it not for the current pandemic
  • Self-certify that it has been adversely impacted by Coronavirus (Covid-19)
  • Generate more than 50% of its turnover from trading activity

What facilities are available through CBILS?

Each accredited lender will be able to provide certain facility types and not necessarily all of them it could include

  • Term Loans
  • Overdraft / Revolving Credit
  • Asset Finance
  • Invoice Finance

Where can I find a list of accredited lenders?

Details of all the accredited lenders can be found on the British Business Bank Website (Click Here)

What documentation is required for CBILS?

Every lender will have their own requirements but generally you will need the following

  • Details of the loan – amount required, what is the money being used for, term of facility
  • Management Accounts
  • Cash flow forecast
  • Business Plan
  • Historic Accounts (normally last 2 years FULL accounts)
  • Assets and Liability statement

If you need help applying for the scheme J&J Commercial Finance is available to help ensuring you have the correct documentation is place for the lender – For an initial enquiry visit our contact page

Summary of scheme and changes

The following has not changed since the scheme launched (23rd March 2020)
  • Provides the lender with a government-backed, partial guarantee (80%) against the outstanding guarantee facility balance, subject to an overall portfolio cap
  • No guarantee fee for smaller businesses to access CBILS
  • A fee charged to lenders for each facility which makes use of the scheme
  • Government has confirmed that the scheme will be demand-led and will be resourced accordingly
  • The maximum value of a facility provided under the scheme is £5m (the original announcement suggested a maximum value of £1.2m)
  • Repayment terms limited to a maximum of six years for term loan and asset finance facilities up to £5m. For overdrafts and invoice finance facilities, terms will be up to three years
  • Available to UK-based businesses with annual turnover of up to £45m per year
  • Principal Privates Residences cannot be secured (prior or post recovery) to support CBIL backed facilities

The table below summarises the changes in the scheme

Coronavirus Business Interruption Loan Scheme
(at 23 March 2020)
Coronavirus Business Interruption Loan Scheme Revised Terms
(6 April onwards)
Use of personal guarantees permissible for all facility sizes, at a lender’s discretion and in line with their normal policies For facilities under £250,000, use of personal guarantees not permitted under the scheme

For facilities above £250,000, use of personal guarantees still permissible in line with their normal policies, but recoveries under these will be capped at a maximum of 20% of the outstanding CBILS facility amount (after other recovery proceeds applied)

Lenders required to demonstrate lending additionality (i.e. lending that without the scheme, wouldn’t have otherwise taken place) Scheme expanded to open-up access to those smaller businesses who would have previously met requirements for a commercial facility and would not have been eligible for CBILS
For facilities above £250,000, the lender must establish a lack or absence of security prior to businesses using CBILS. Insufficient collateral requirement removed, allowing those SMEs who are considered to have sufficient collateral to access CBILS facilities
At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under For facilities under £250,000, use of personal guarantees not permitted under the scheme
For borrowing proposals which, were it not for the current pandemic, would be considered viable by the lender. Viability assessment unchanged but for small loans this determination could be based on the lenders’ internal credit models

 

Covid-19 Business Support – Coronavirus Business Interruptions Loan Scheme

The Coronavirus Business Interruption Loan Scheme (CBILS) is a new scheme announced by The Chancellor at the Budget 2020 – it supports a wide range of business finance products including term loans, overdrafts, invoice financing and asset finance.

Key features of the scheme include

  • Up to £5m facility: The maximum value of a facility provided under the scheme will be £5m, available on repayment terms of up to six years.
  • 80% guarantee: The scheme provides the lender with a government-backed, partial guarantee (80%) against the outstanding facility balance, subject to an overall cap per lender
  • No guarantee fee for SMEs to access the scheme: No fee for smaller businesses. Lenders will pay a fee to access the scheme.
  • Interest and fees paid by Government for 12 months: The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.
  • Finance terms: Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.
  • Security: At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under. For facilities above £250,000, the lender must establish a lack or absence of security prior to businesses using CBILS. If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
  • The borrower always remains 100% liable for the debt.

There are some criteria and eligibility criteria that the British Business Bank have issued these are

  • Be UK-based in its business activity, with an annual turnover of no more than £45m
  • Have a borrowing proposal which, were it not for the current pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty.
  • Please note: If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.

We work with several lenders that are part of this scheme, as well as a whole range of other lenders. Lenders are still open for business and J&J Commercial Finance can help you apply to the right lenders to support your business and help with cash flow.

If you would like to apply, please contact us via our contact page or you can arrange a zoom call by booking on the following link – Arrange Zoom Call

Applying for finance

With businesses looking for additional finance in light of Covid-19 to help speed up the process please find below the information that brokers and lenders are going to need

New Startup Business – under 2 year

  • Business Plan
  • Cashflow Forecast
  • Creditor and Debtors (applying for invoice finance)
  • Last 3 months business bank statements
  • Last 6 months merchant card statements (if applying for a merchant cash advance)
  • Last set of Full accounts or Management Information

Existing Businesses – over 2 years

  • Last 2 years FULL accounts
  • Management Information
  • Last 3 months bank statements
  • Last 6 months merchant card statements (if applying for a merchant cash advance)
  • Creditor and Debtors (applying for invoice finance)

As well as this, lenders will need to confirm ID and addresses of those named on an application

  • Passport
  • Driving Licence
  • Utility Bill (within last 3 months)
  • Bank Statement

Lenders might also have their own requirements for example some might need 6 months rather than 3 months bank statements or require additional verification checks. To take away the hassle we work with our clients and lenders to ensure that the necessary information is collated and submitted to avoid any delay in the funds being released.

Businesses will be able to obtain their FULL accounts from their accountants this is due to bridged or micro accounts being submitted to companies which only contain the basic information

Who needs to be named on an application?

Lenders will require all directors of the company and significant shareholders (normally those with more than 20% shareholder) to be named on an application.

If you would a free business finance review, please contact us via our contact page or you can arrange a zoom call by booking on the following link – Arrange Zoom Call

 

Business support during Covid-19

The past few weeks have been challenging times for a number of business sectors and I’ve seen a lot of worried business owners comment in various forums. I thought it was worth pulling together some latest information from the lenders that we work with.

A number of lenders are coming out and supporting businesses with the additional challenges that Covid-19 is bringing. Just today (16th March) two high street banks have announced their policies with one reducing/removing arrangement fees and another looking at temporary loans and repayment holidays.

One thing is clear is that lenders are willing to support businesses and as such if businesses are struggling with their existing commitments then they should be talking to the lending. Every lender regardless of Covid-19 will have a financial difficulties policy for both individuals and businesses.

As part of the budget announcements, the Coronavirus Business Interruption Lending Scheme was announced this will temporarily replace the EFG fund that many might be familiar with. This scheme is being administered via the British Business Bank and available through a number of their partners. However, scheme details are still being drawn up so more details will come out over the coming days/weeks about this scheme.

In the meantime, lenders are still open for business and supporting businesses with unsecured loans, asset finance (new and existing equipment/machinery), invoice financing and merchant card advances (based on your monthly card takings). Also with the base rate reduction, it might be an option to look at refinancing property/mortgages as and when new rates are released by lenders.

To help support businesses we have created a funder finding portal that enables businesses to input their lending requirements and then look at potential lenders. We are also available to answer any questions and will be posting regular updates via our social media and website.

Our funding portal can be found JJCommercialFinance.FunderFinder.co.uk

All our contact details can be found on our website JJCommercialFinance.co.uk please bear with us as we are seeing enquiries increase but we will respond ASAP.

SPV Image

SPV for Property Purchases

When clients are looking for Property Finance I often deal with clients that have decided to setup a Special Purchase Vehicle (SPV) for their purchases. If this is done correctly then there are number of lenders who will except these entities but some lenders have tight criteria on how the SPV should be setup.

What is a SPV?

A Special Purpose Vehicle (SPV) is a type of limited company that is set up just to hold property and do nothing else. Buy to let lenders offering mortgages to corporate vehicles mostly prefer SPVs to trading limited companies because they are easier and quicker to understand and underwrite, and are perceived as being lower risk.

Many more landlords are now purchasing rental property via an SPV limited company because it can be more tax efficient now that the changes to tax relief on finance costs for individual landlords have been phased in.

What to look out for?

There are a few things to look out for when setting up your SPV to ensure you meet lenders criteria

SIC Code

The Standard Industrial Classification (SIC) is used to classify business activities and is recorded on Companies house when you setup your SPV. Many lenders will only accept specific SIC codes. These tend to be from the Real Estate Activity section, such as

68100
 
Buying and selling of own real estate
68209
 
Other letting and operating of own or leased real estate
68310
 
Real estate agencies
68320
 
Management of real estate on a fee or contract basis

However some lenders will only accept a few of the codes and not all of them. Its best to speak to the lender or broker before setting up your SPV to ensure its established with the correct SIC.

Shareholders

The best thing to do is keep it simple. Some lenders don’t like to see another LTD company as a shareholder of a SPV. Also remember that controlling shareholder or shareholders with 25% or more will need to be named on an application. They may also need to provide a personal guarantee.

Do I need a separate bank account?

Yes – The SPV will need to have a separate bank account from which any mortgage payments will be taken from. Lender will check that the account is setup in the SPV name.

What can I use the SPV for?

SPV’s can be used for Bridging Finance, Buy to Let and Development Finance – where the sole purpose of the SPV is just to hold property