As promised by the Government, further detail was provided on the Coronavirus Business Interruption Loan Scheme (CBILS) this week, and in what was an unprecedented timeframe, the scheme is now live.
We have been working with clients and funders to understand the practical considerations for business who are interested in the scheme – some of which is not immediately obvious but important nonetheless when assessing whether the scheme is right for you.
- At present, most banks are offering the scheme to existing customers only. Some alternative lenders do not have the same restrictions, but the timeframe in securing funds is likely to be longer and rate of interest higher.
- Many lenders are offering a 12-month capital repayment holiday. This combined with the Government covering interest over the same period means some customers will not need to make any payments for the first 12 months.
- No arrangement fees will be payable by borrowers, and most will not charge an early repayment fee.
- Where the loan amount is more than £250k, the process is more onerous as security (such as personal guarantees from directors) will be required.
- The lending decision will be based on the business demonstrating profitability prior to the current crisis, as well as putting forward a business case for it being profitable once things return to normal. Management information, statutory accounts and forecasts will be key in demonstrating viability.
- Most banks expect to be able to release funds in two weeks from application date.
- Where the bank is able to lend to the business on its usual commercial terms, (i.e. without using the CBILS scheme) they will do so. This will primarily affect those businesses with business assets which would be acceptable security to the lender.
At Magma we have extensive experience in assisting clients in securing funding. If you would like to discuss your funding options, please get in touch with your usual Magma contact or Shaf Bheda on [email protected]