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:
We will keep you updated as we gather more experience from the field and from our discussions with the lenders.
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
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.
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.
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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