- 20 Mar
Coronavirus Business Interruption Loan Scheme (CBILS) And Alternatives
UPDATE: CBILS SCHEME DUE TO CLOSE 31/03/2021 - NEW RECOVERY LOAN SCHEME ANNOUNCED.
Following the novel coronavirus outbreak, the UK Government has announced that there will be a Coronavirus Business Interruption Loan Scheme, CBILS for short, available from 23rd March 2020. This will be orchestrated by the British Business Bank (although they don't deal with applications themselves) and the Government will guarantee 80% of the value of the lending by their partner organisations, a measure which is intended to enable a broader cross section of businesses to qualify for emergency loans.
Even if you find that you don't qualify or are declined for funding under the scheme - there may be alternative forms of business finance for which you may still qualify.
Coronavirus Business Interruption Loan Scheme & Alternatives
The CBILS scheme will help support UK businesses that have been affected by the recent outbreak, providing business loans and other types of finance such as overdrafts, invoice finance and asset finance.
We were pleased to see that several of the finance companies from our panel of funders, appear on the partner page of the British Business Bank's website, set to offer these facilities.
The criteria for the CBILS scheme can be found on the British Business Bank's CBILS page. The site goes to great lengths to stress that the borrower remains liable to repay the sum borrowed. It is also the case that the guarantee from the Government only covers 80% of the sum lent, therefore, the lender will still be taking a risk on the remaining 20% - this will no doubt affect the liberality with which this funding is provided.
Post publication update see: CBILS Loan Approval Rate In Week 1
Alternative Business Finance
It is early days yet for the scheme, and full details of how it will work are not known, but some are commentators within our sector have already raised concerns over how widely it is likely to be available. They have also questioned to what extent the process will be simple, and fast, for businesses to access. The eligibility criteria will also be an important factor in determining just who will qualify for help.
Initial reports are that these lenders have received significant numbers of enquiries as soon as the scheme opened. There are reports of significant delays getting through to some banks. We can offer you an alternative to waiting - call us on 03330 113622.
Even if you were to be declined, or turned down, for CIBILS, or you are unable to meet any of the required criteria to be eligible, there are highly likely to be other options available within the alternative finance market. Perhaps if you are not able to clearly demonstrate the impact of the COVID-19 outbreak on your business for instance, other funders may still be able to assist you regardless of your circumstances.
Invoice Finance Given Prominence
It was good to see invoice financing being given such a prominent position within the variety of facilities that can be provided to assist businesses. Often there is a preference for traditional forms of finance such as loans and overdrafts, when invoice finance can provide a more flexible option.
Advantages Of Invoice Finance Over Loans
We have often found that a factoring or invoice discounting facility can generate more funding than may be available through loans and overdrafts. Also, a factoring or discounting facility is revolving in nature which can be an advantage. This means that as you raise invoices you generate finance, then as the invoices are paid by your customers - the finance is repaid. However in the trading cycle of a normal business, raising invoices every month, and being paid every month, the value of the sales ledger overall can remain stable. This means that the level of funding provided can also remain stable - or increase as you grow and your sales ledger gets bigger.
This can have benefits over a loan. With a business loan you have to repay the capital sum over the term of the loan. With invoice finance, providing your sales ledger remains stable - or grows, you can continue to benefit from the full prepayment that is made available - for as long as you continue to use the facility. This can be an attractive advantage to companies who would benefit from the ongoing availability of a cash injection.