6 Top Tips For Your Business Interruption Loan Application

The Coronavirus Business Interruption Loan Scheme (“CBILS”) can provide facilities of up to £5m for smaller businesses across the UK who are experiencing disruptions to their cashflow as a result of the COVID-19 outbreak.

The scheme can be accessed via the lender (including all high street banks) and supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance.  To be eligible for a facility under CBILS, a small business (in any sector) must:

– Be UK-based in its business activity, with annual turnover of no more than £45m.
– Have a borrowing proposal which, were it not for the current pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty.

Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.  At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under.

Details on how to apply can be found at https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/for-businesses-and-advisors/.

This is not a blank cheque from Banks or the Government and whilst these are extraordinary times for everyone, lenders will still need to assess credit risk and your ability to repay.  Businesses will need to apply for loans in a structured manner with a typical borrowing and repayment proposal.

Here are our top tips when approaching your bank for a CBILS loan.

1. Business Overview

If you are new to the bank, provide a brief history and introduction to the business, including how the business was performing before the COVID-19 outbreak and what impact the outbreak has had on your business (financially and operationally).

If you have a financial forecast, it is useful to summarise what your business was forecast to achieve in the current year (and the next 2 years), to show you have a business which is considered viable for lending, and what your reforecast now looks like post COVID-19.  The last bit is the most difficult and clearly there will be a huge amount of uncertainty in the forecasts because we are in unknown territory but a sensible proposal will set out your approach and assumptions in the reforecast clearly – the banks will be assessing your ability as a management team as well as the financials.

2. Cash Forecast

Any lender will expect to see a cash forecast for your business (post COVID-19) – preferably a 13 week forecast and a full year monthly (or weekly) forecast.  Set out all your receipts and payments clearly, alongside current funding options – this will identify the lending requirement (including when and for how long).

3. Action Taken to Date

Provide details of measures already being taken to ensure you have adequate cash in the business.  The bank will want to see you have done all you can before additional lending via the CBILS.  Go through your receipts and payments line by line to identify possible actions including:

– Stricter credit control on existing debtors
– Stop or reduce trade creditor payments
– Cut ongoing costs where possible
– Contact HMRC about Time to Pay on all HMRC liabilities (VAT payments are automatically deferred until after June 2020)
– Contact landlords and local authorities about payment holidays
– Consider the Coronavirus Job Retention Scheme for furloughed workers
– Various Government grants for rates and hospitality and leisure sector

4. Other Funding Options

Summarise your current funding options (e.g. overdrafts, bank loans, shareholders loans, HP etc) and the discussions you have already had with these lenders to agree payment holidays / interest roll-up / additional facilities.

There are many opportunities available for businesses with finance options including asset backed lending, alternative lending, challenger banks and peer-to-peer lending.  It will probably cost you more but it might be worth it if it helps your business get the current crisis.  One of the key challenges is finding the right lender for your situation and be careful to fully understand the terms you are signing up to.

5. Information Required

Banks will still be likely to require some information to carry out due diligence so be prepared to share your last full year accounts, latest year to date management accounts and P&L/balance sheet/cashflow forecasts as discussed above.  They may also ask to see other documents such as your existing loan agreements, latest debtor ledger, latest creditor ledger and fixed asset list.

6. External Support

Use external support if you are inexperienced in preparing information for lenders or if you existing finance function is unavailable/sick or too busy fire-fighting the day to day issues.

At present, we are offering free support and advice, up to a certain level, to help businesses across the East. Whilst travel and face to face meetings may be difficult, we have a team of experienced professionals willing to help and provide guidance on your loan application if you need it.  Please do not hesitate to contact us, all of our team members’ mobile numbers are available on our team pages.