How do I apply for a Coronavirus Enterprise Interruption Mortgage?
How do I apply for a Coronavirus Business Interruption Loan?
UPDATED: The Coronavirus Business Interruption Loan Scheme (CBILS) was extended until the end of March 2021.
It was last extended to January 31, 2021, but the deadline has been postponed to help companies recover in the new year.
On July 30, the Coronavirus Business Interruption Loan Scheme was relaxed to call more SMEs into question for emergency funding.
Until then, an SME classified as a 'company in difficulty' was prohibited from accessing the loan unless the company was less than three years old. You would be a company in trouble if, by deducting the accumulated losses from the reserves, a negative amount of more than half of the subscribed capital as of December 2019 was left.
These changes mean that SMEs with fewer than 50 employees and sales of less than £ 9 million will not be classified as companies in difficulty unless they are in bankruptcy or receive certain types of aid. It is expected to help small businesses that have previously received private equity and venture capital funding.
Allie Renison, Director of Europe and Trade Policy at the Institute of Directors, said:
“This is a welcome move to give more UK businesses access to much-needed funding. The UID test has caused a lot of frustration, and the IoD has knocked on both the government and Brussels doors to secure this change.
“It is now up to the lenders to be aware of this development and ensure that the support gets where it is needed. As companies try to get back on track and start up again, cash is running out so it can't come soon enough. It is vital that the government provide lenders with sufficient clarity and guidance on their own criteria to ensure that there are no further delays. "
The Coronavirus Business Interruption Loan Program went live on Monday March 23rd.
British Business Bank provides the loan program that helps SMEs gain access to bank loans and overdrafts. The interest rates will be similar to current bank loans.
The government will give lenders an 80 percent guarantee of each loan, subject to a limit per lender on the number of bad loans they can apply for.
And you don't have to be banned from commercial lending to access the system.
> See also: Coronavirus Government Statutory Sick Pay – How To Apply For It
How the Coronavirus Business Interruption Loan Scheme works
The program supports loans of up to £ 5 million per small business. This new guarantee, which replaces the existing £ 500 million Corporate Funding Guarantee (EFG), will initially support loans of up to £ 1.2 billion.
On March 27, Chancellor Rishi Sunak announced that the CBILS had received 30,000 applications in just four days. Approval of loan applications will take anywhere from four to six weeks, according to Rangewell, an SMB finance broker.
The Chancellor announced further updates to the CBILS on April 3, banning all lenders from asking for personal guarantees on loans below £ 250,000 – something the lenders had already publicly committed to
More than 40 lenders, including the four major banks – Barclays, HSBC, Lloyds and RBS – provide either loans, overdrafts or asset-based loans that are backed by equipment or bills through the program.
However, the Coronavirus Business Interruption Loan is intended to offer more attractive conditions than the EFG for both small businesses and lenders. However, some small businesses have complained that interest rates of up to 35 percent are charged. The Federation of Small Businesses has called for the interest rate on coronavirus emergency loans to be capped at 6 percent.
- Financing terms are three months to ten years for term loans and asset finance and up to three years for revolving facilities and invoice finance
- Lenders don't charge small businesses or banks for this guarantee. And the government will forego the 2 percent it charges borrowers annually for the EFG guarantee
- However, the small business borrower always remains 100 percent liable for the debt
Main Features of Coronavirus Business Interruption Loan
- Up to £ 5m facility: The maximum value of any facility under the program is £ 5 million and is available on repayment terms of up to six years. Registered businesses can borrow between £ 10,000 and £ 5 million while sole proprietorships and partnerships can borrow between £ 25,001 and £ 5 million
- Larger companies: With a turnover between 45 and 500 million GBP, up to 25 million GBP can be borrowed
- 80 percent guarantee: The system provides the lender with a government-sponsored partial guarantee (80 percent) on the outstanding facility balance, subject to a cap per lender
- No personal guarantees for facilities under £ 250,000: Personal guarantees of any kind cannot be made under the program for facilities under £ 250,000
- Personal guarantees on facilities over £ 250,000: Personal guarantees may still be required at the lender's discretion, but recoveries under these guarantees are limited to a maximum of 20% of the outstanding amount of the CBILS facility after the proceeds of the business assets have been used. A Principal Private Residence (PPR) cannot be viewed as security in support of a personal guarantee or security for any CBIL-sponsored facility
- security: For all facilities, including facilities over £ 250,000, CBILS can now support lending to smaller businesses, even if a lender deems it sufficiently secure that more smaller businesses are eligible to receive business interruption payment
- No guarantee fee for SMEs to access the system: No fee for smaller businesses. Lenders pay a fee to access the system
- Interest and fees paid by the government for 12 months: The government will provide a business interruption payment to cover the first 12 months of interest payments and any lender charges, so smaller businesses can enjoy zero upfront costs and lower initial repayments. After 12 months, the rate is a floating rate with the option of being fixed
- Financial conditions: The term of the loans for fixed-term loans and asset finance facilities is up to six years. The term for overdrafts and invoice financing facilities is up to three years
- Variable interest rate with the option to repair after the initial interest free period
- Security: At the lender's discretion, the system may be used on unsecured loans for facilities of £ 250,000 and below. For facilities over £ 250,000, the lender must determine a lack of security before companies use CBILS. If the lender can offer financing on normal trading terms without using the system, they will
- The borrower is always 100 percent liable for the debt
Is Your Small Business Eligible for a Coronavirus Business Interruption Loan?
Smaller companies from all industries can apply for the full amount of the facility. To be eligible for a facility under CBILS, a smaller business must:
- The company is based in the UK and has annual sales of no more than £ 45 million
- Have a loan proposal that would be deemed viable by the lender without the current pandemic.
- Confirm for yourself that it has been affected by the Coronavirus (COVID-19)
Lenders offering Coronavirus Business Interruption Loans
How to Apply for a Coronavirus Business Interruption Loan
First and foremost, businesses should turn to their own provider – ideally through the lender's website. You can also consider reaching out to other lenders if they cannot access the funds you need.
Compare business loans from across the market Know your money with our partners.
Your CBIL loan can be combined with other forms of financing, e.g. Crowdfunding platforms and other lenders. Small Business has partnered with FundingOptions.com to help you find the right financing for your business. You can find your page here.
How long will it take to receive my loan?
Approval of loan applications will take anywhere from four to six weeks, according to Rangewell, an SMB finance broker.
However, the banks on Main Street have blamed British Business Bank for months of delays that prevented thousands of small businesses from accessing much-needed funds.
Under the terms of the CBILS, launched two weeks ago, banks make their own decisions about which customers to lend to, but must book those loans with the British Business Bank. And banks have to follow the BBB's rules if they want to reclaim the Treasury's 80 percent guarantee through the system.
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This page is continuously updated to provide more information from British commercial bank becomes available.
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