During the unprecedented disruption to businesses and the economy over the past two weeks, Gambit has remained fully up to date with current best practice and all forms of financial and practical assistance being made available.
Today it has been announced that the Coronavirus Business Interruption Loan Scheme (CBILS) has been reformed, following concerns that the scheme did not provide enough support to businesses of all sizes and calls for a more comprehensive and efficient process.
Changes to the scheme include:
- Support for larger companies
- Previously, the CBILS was only available to firms with turnover of less than £45m.
- The revamped scheme will offer 80% government-backed loans of up to £25m to firms with revenues of between £45m and £500m.
- Restrictions on personal guarantees
- Banks will now be restricted from requesting personal guarantees for facilities below £250,000.
- For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, however:
- recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied.
- a Principal Private Residence (PPR) cannot be taken as security to support a personal guarantee or as security for a CBILS-backed facility.
- No requirement for commercial loan applications
- The requirement for companies to have first tried to obtain a commercial loan from their bank has also been dropped.
Gambit’s dedicated Debt Advisory team is in daily direct contact with the British Business Bank, key industry bodies, mainstream funders and alternative finance providers to understand the latest guidance and financial support available, and more importantly how to access it. This provides us with extensive insight into the government support schemes and the processes each funder is implementing to support businesses at this critical time.
We have been assisting many businesses with their COVID-19 action plans and CBILS applications, stress-testing their forecasts and providing guidance on funding available and how to approach funders for support. We have outlined below current best practice in mitigating the implications of COVID-19 by utilising the various support schemes available.
Key things to consider:
- Act sooner rather than later in assessing requirements and put plans in place in order to avoid being at the ‘back of the queue’.
- One shot at an application for funding. Demand for CBILS and other funding is extremely high. In order to process applications, credit functions will be under significant time pressure and will need to make decisions based on the initial information provided, rather than the typical iterative process. Therefore, applications with robust supporting information including detailed COVID-19 action plans and financial projections which reflect contingency planning will be quicker to process and more likely to succeed. Applications with missing information may be declined completely.
- All companies should prepare a COVID-19 action plan, which sets out the commercial/operational and financial risks to the business and the mitigating actions taken. This plan should be monitored and updated regularly.
- Businesses will need to demonstrate a clear and viable need for funding. Assessing short and medium-term working capital needs and co-ordinating and stress-testing various scenarios to identify funding gaps and range of outcomes is recommended. It is also important to consider the working capital requirements for the business once the COVID-19 restrictions are lifted and business begin to operate normally again. The funding requirement then needs to be assessed against the pre-COVID-19 debt capacity of the business.
If you would like to set up a call to discuss the challenges facing your business, understand the most appropriate funding options available and best practice in presenting your COVID-19 plan to your stakeholders, please contact a member of the team.
Jason Evans, Head of Debt Advisory
