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To maximise the financial support available to businesses, the Chancellor is amending the CBILS so that all viable small businesses affected by COVID-19, and not just those unable to secure regular commercial financing, will now be eligible should they need finance to keep operating during this difficult time. Previously the government-backed loans for small businesses were only available to firms that had been turned down for a commercial loan from their bank.
The government is also stopping all lenders operating the CBILS from requesting personal guarantees for loans under £250,000 and making operational changes to speed up lending approvals. The Government will continue to cover the first twelve months of interest and fees.
We understand that for loans above £250,000 any personal guarantees requested will be limited to 20% of the amount of borrowing above £250,000.
Whilst the above changes are welcome, we still have concerns around the ability of CBILS to quickly deliver vital cash injections into businesses, particularly as business support grants have yet to be received by eligible businesses, and it is unlikely that funding to support the Job Retention Scheme will be available much before the end of April.
Particular issues we would still see are:
- Smaller businesses are struggling to get access to CBILS, as the amount, they are asking for is below the bank’s lower limits for the scheme. The banks appear to have varying starting levels for loans, with some starting at £1,000, but a number have a limit of £25,000. Many small businesses don’t want or need access to that level of funding. This is also manifest in businesses with a turnover below £100,000 being excluded by some lenders. Given most lenders are not accepting enquiries from new customers (quite understandably), the advice to “shop around” for a suitable lender isn’t much use.
- Whilst the removal of the personal guarantee requirement is perceived to be good for the businesses applying, it does make the lending proposition inherently more risky for the banks with 20% of the lend exposed due to lack of security – we believe some lenders who were offering CBILS have pulled out, and this is sure to be reflected in the interest rates charged (albeit 12 months picked up by Government). It also increases the risk of a “No” answer, as lenders ultimately have the final say on whether finance is provided or not.
- The whole process needs significantly streamlining to ensure maximum assistance is provided, as the ultimate intention of the scheme. So far approximately 0.8% of enquiries to lenders have resulted in finance being made available. Less than 1,000 SME’s have benefited to the tune of £90M – this is way too little, way too slowly.
We will keep you updated as we gather more experience from the field and from our discussions with the lenders.
We are here to support you during these unprecedented times. If you have any queries or need any advice, please contact me or your local Thomas Westcott representative.
The temporary scheme has been up and running since last Monday 23rd March and will run initially for 6 months . There are 40+ banks in the scheme (The 40+ accredited lenders are listed on the British Business Bank website.
All the lenders have been inundated with calls and applications. Applicants should be aware that the scheme is at the discretion of the lender and there is not an automatic “Yes” if you apply. The Government guarantee under CBILS is to enable a lender to turn a “no” credit decision into a “yes”.
To provide support with applications summarised below are the eligibility criteria and some other pointers to assist with applications.
Who is eligible:
• Your application must be for business purposes
• Your CBILS-backed facility will be used to support primarily trading in the UK
• You must be a UK-based SME with annual turnover of up to £45m
• You wish to borrow up to a maximum of £5m. (Finance terms are up to six years for term loans and asset finance arrangements. For overdrafts and invoice finance facilities, terms will be up to three years)
• Your business must generate more than 50% of its turnover from trading
• You satisfy a viability test
Our understanding of the key points needed to meet the viability test are that you need to be able to answer Yes to the following:
1. Was the business viable before the impact of Covid-19?
2. Was the business impacted by Covid-19 and due to the impact would fall outside of normal bank lending criteria?
3. Can the business trade through the situation in some way with support?
Some points to consider if applying:
Speed - Approach your existing bank first ideally through their website. They know you and your business. (Front line feedback – lenders are only dealing with existing customers at present)
Financial information – you will need latest year-end accounts and management accounts and forward projections for cash flow.
Level of borrowing - Consider carefully the level of borrowing you are asking for.
Security – Security is not required for lending below £250K again at the discretion of the lender. ** Lenders will need to look at security for borrowing over £250K
Impact on your business - Highlight the impact the pandemic has had on your business to help show viability.
Viability – Ensure you address the viability questions above.
Other actions - Outline what other proactive actions you have taken.
Keep your frustrations in check - Don’t let your frustration out on the bank manager they are also under strain.
Consider outside help –Seek advice and support from your accountant / financial advisor
**Latest news - 9 banks have lifted the personal guarantee requirement for any borrowing below £250K – Barclays, Bank of Scotland, HSBC, LLoyds, Metro, Nat West , Santander, Ulster and Virgin
We are here to support you during these unprecedented times. If you have any queries or need any advice, please contact me or your local Thomas Westcott representative.
Following the initial announcement of above scheme on 20 March, we now have some welcome detailed guidance on how the scheme will work (see help sheet).
Following what was a week of sweeping announcements of support for businesses and employees, the daily public statements at the start of this week have been, understandably, more about health, social distancing measures and the protection of British citizens.
In light of the ongoing pressures of COVID-19, HMRC are today announcing the extension of the Making Tax Digital (‘MTD’) for VAT soft-landing period for integrating ‘digital links’.
Given the unprecedented situation that we face at present and the government’s actions taken to stem the spread of coronavirus, there are many lessons that can be learnt about contingency planning for business. However, a few simple adjustments can mean that your accounting function can continue to process the year end remotely, enabling your business to meet its statutory deadlines. Here we focus on avoiding the complications of an inability to perform a stock count.
For individuals who planned to be non-UK resident for tax purposes, getting stuck in the UK due to travel restrictions may have given rise to concerns over whether they would be treated as UK resident for tax purposes and therefore be drawn into possibly having to disclose worldwide income and gains to HMRC.
As more and more work and correspondence is carried out electronically we are just letting you know that we have a secure client portal in operation.
On March 26th the Chancellor of the Exchequer Rishi Sunak announced further measures to the self-employed affected by Covid-19.
We have outlined the measures currently available to support Britain’s five million self-employed.
In what was another day for unprecedented announcements, yesterday the Chancellor presented how the Government intends to provide support to the self-employed. In simple terms, self-employed workers will receive a taxable grant designed to mimic the previously announced support to businesses and employees through the Job Retention Scheme.
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Registered to carry on audit work in the UK and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales, details about our audit registration can be viewed at www.auditregister.org.uk, under reference number C001091748, and details of all audit regulations can be accessed at www.icaew.com/regulations. A list of members can be found under Legal Notices. Thomas Westcott has offices in Axminster, Barnstaple, Bideford, Bridgwater, Burnham on Sea, Crediton, Exeter, Holsworthy, Honiton, Ilfracombe, Okehampton, Plymouth, Seaton, Somerton, Tiverton, Torquay and Weston super Mare.
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