The Coronavirus Business Interruption Loan Scheme is available through Johnson Reed to support small businesses through the pandemic. Our team have been working with businesses to ensure the process is smooth, helping businesses to secure essential funding to continue to trade. The loan is available for an unknown amount of time, it has various stages, requirements and process that must be adhered to so that our panel of accredited lenders can process applications smoothly.
We have been working hard to ensure businesses and businesses owners are well-informed to make an application in order to protect jobs and help businesses to continue. This includes giving business owners the specific list of information required to make a loan application. Businesses must first meet the criteria for CBILS, in order to determine if the business is eligible to receive funds. The criteria is set by the government, as it is a government-backed loan, however, individual lenders may adjust this criteria at their own discretion. This comprehensive list should let business owners know whether or not their business qualifies for the scheme.
Minimum 3 years trading
Lenders have asked for 3 years of trading activity for most applications, in order to give a good idea of the business potential and history. This helps the lender to determine if this business has traditionally been self-sufficient and whether it has the stability to withstand financial uncertainty. Although this is not the case with all businesses, generally three years has been the accepted minimum.
UK-based business that’s been adversely affected by Coronavirus
As the scheme is supported by the UK government, the business applying for the scheme must be based in the UK or at least be trading in the UK for an application to be considered. In addition, the business must be adversely affected by Coronavirus. meaning sales or trade has been negatively affected, staff have had to be furloughed or projects have been cancelled or delayed. If it can be proved by way of cancelled or delayed orders then lenders are likely to support this. In addition, businesses do not have to be completely closed to have adversely affected.
Annual turnover of no more than £45m
To be eligible for a CBILS loan, a business must not have an annual turnover of more than £45 million. This means that the total sum of money received must not exceed this amount. For businesses with turnover in excess of this amount, the Coronavirus Large Business Interruption Loan Scheme (CLBILS) may be available.
Application must be for business purposes
Any application and subsequent loan must be made for business purposes only, to contribute to the continuation of the business in its activities. This means it must not be used to pay personal debt or liabilities, mortgages or bills, etc. Due to the nature of the loan and the conditions it is bound by, this is a requirement. Due to this, lenders are likely to require a cash flow projection or plan of spending.
Business must generate more than 50% of its turnover from trading activity
As the scheme is supported by the government, more than 50% of turnover/revenue must comes from trading activity, meaning that external investment or other sources of income are limited to below 50%. Lenders may and are likely to require proof of this to process an application and grant a loan.
Borrow between £50k and £250k
For CBILS loans with Johnson Reed, our panel of accredited CBILS lenders have stated that businesses can apply for a loan between £50,000 and £250,000. the amount of funding granted may depend on turnover or staff wages, this varies from lender to lender and will be made clear when your application is considered.
Finance terms between 24 and 60 months
For businesses looking to make an application, the maximum repayment term is 5 years (60 months), with the first 12 months payment free, this is consistent across various lenders, and will be used to support businesses with the initial repayment break. The terms of repayment will be specified when your loan is approved.
Business not in financial difficulty prior to the COVID-19 outbreak
Unfortunately CBILS Loans aren’t designed to support failing businesses or those businesses with unmanageable debt. Businesses will have to demonstrate financial security and positive turnover, to prove the business was in a strong position before the outbreak of the Coronavirus, this may be in the form of bank statements or accounts, and will be requested by the lender in full.
Agreement types considered
The CBILS is only available for certain types of business finance, however should cover the majority of financial needs. The scheme will consider business loans, hire purchase finance for equipment. lease finance for equipment and equipment finance or re-finance. These facilities should be suitable for most requirements, however it is essential that businesses understand the terms of each type of finance.
The scheme is there to support businesses through a difficult economic period and businesses fitting this criteria are encouraged to gather the information needed and make an application, as the funding facility will is not permanent and could stop taking new applications at any time. For businesses to survive, financial support is encouraged and important, even more so when supported and encouraged by the government and British Business Bank.
Our online application form can be found here.
Download our PDF for more information.