6th April 2020 / COVID-19 Updates

Coronavirus Business Interruption Loan Scheme (CBILS) - Update

There has been significant criticism, levelled at the Government and lending institutions regarding the CBILS which was launched on 23rd March 2020. The aim of the scheme is to support SMEs to be able to access bank lending and overdraft facilities during this difficult time.

What was the criticism?

  • Lenders were not lending.
    Out of 130,000 applications, only 983 had been approved as at 3rd April. [Update 16/4/20 - there have been more than 300,000 inquiries with only 28,600 formal applications. Of which 6,000 have been granted (source “The Guardian” 15th April 2020)]
  • Lenders were taking applicants down the normal commercial lending route rather than providing them with the options available to them through CBILS. [Update 16/4/20 - Recently, the banks have improved the applications process with a 150% increase in the number of loans being approved.]
  • Lenders were asking for personal guarantees (e.g. shares, cash and property) to cover 100% of the loans. [Update 16/4/20 - As of today this cannot be corroborated. There are 40 banks now issuing the loans but there are no stats or evidence currently to show which banks are issuing the most loans.]
  • Interest rates charged were above the recommended rates
    The interest rate charged by some accredited lenders ranged from 6% to as high as 30%.
  • Lenders were slow to provide the loan
    There is a delay of up to 6 weeks in providing the loan in some cases.[Update 16/4/20 - There are reports that although this may be easing, delays are still too long to help small businesses.]

What amendments have been made?

  • Applicants do not have to go down the normal commercial lending route but can apply purely through the CBILS.
  • Lenders cannot request personal guarantees for loans under £250,000.
  • For loans in excess of £50,000, lenders can only request personal guarantees on the 20% element above the 80% Government guarantee.
  • Options are now available for larger companies
    The Government is adding to the scheme in respect of large companies (turnover between £45 million and £500 million) The Government will provide an 80% guarantee for loans up to £25 million.

What should you do now?

  • If you have been turned down for a loan under the old basis you can reapply under the new rules.
  • If you are in financial distress due to the COVID-19 disaster, consider putting in a loan application under CBILS.
  • If you want to discuss your options, please give us a call, we will be happy to help.

M.A.D. Accountants are based in West Bridgford, Nottingham, and are specialists in tax and accountancy assistance for businesses and individuals. We're here to make a difference to your business and your life with no-nonsense, jargon-free advice and help.

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