IMPORTANT: Information for Accountants regarding Coronavirus Business Interruption Loan Scheme (CBILS)

There has a lot that has happened lately and been an amazing amount of information to digest and relay to clients in the various schemes that have been available.

There has been an extension to some of those schemes and the main funding facilities to aid firms are the Bounce Back Loan Scheme (BBLS) and the Coronavirus Business Interruption Loan Scheme (CBILS).

The first scheme is administered through business bank accounts and covers a maximum ￡50,000 and the information required for this is minimal to access. During the lockdown a number of banks have closed the option to open a new bank account whilst they concentrate on administering help to existing customers but they have opened the doors to new accounts now.

One thing that might me worth doing is assessing the number of accounts a business may have as a client of mine could not get a BBL through what he classed as his main account but was able to access the full ￡50k through what he classed as his secondary account.

BBLS is the quickest and easiest route to get up to ￡50k at 2.5% across the board and these are designed to be easily accessed although the bank may put some of their own restrictions on availability

Some firms early on where denied funds by their own bank as they classed them as businesses "in difficulty" but the Government has since intervened and said that statement only relates to insolvencies or businesses in restructuring plans in December 2019 not if a payments had been missed or December was a quieter period so not as much money has gone through the account compared to the previous months which can be how the business usually operates anyway!

This means any firm that has applied for a Bounce Back Loan with their bank prior to 31st July 2020 and was rejected as they were classed as a business in difficulty can reapply if they were not in insolvency proceedings or a restructuring plan at the end of 2019.

The CBILS is the next step up from BBLS and deals with any amount over ￡50,000 and this is more at the mercy of the credit criteria of who you are applying to. Alternative lenders are able to offer funds in this area as there is no requirement to have a bank account to get it. This can be particularly important if a business operates an overdraft as there have been a number of cases where banks are offering new monies on a CBILS basis but withdrawing the overdraft to reduce their overall exposure.

The amount you can get from the scheme is limited to 25% of the last filed year end accounts turnover this can be on a loan or lease basis and is designed to help firms push on whether its aiding cashflow, allowing the firm to strengthen its position or to diversify. There is to restriction on the business purpose and it can be used for what the business owner deems the most appropriate moving forward.

If there are some new accounts to be filed showing an improved turnover for the year it may be advisable to wait until this have been filed in order to get the level required to support the firm.

With all the information about all these schemes there it is still unclear on some of the options and below are some of the important considerations for firms to maximise the Government assistance available.

• You cannot have a BBL and a CBILS running at the same time (But you can take a larger CBILS loan and clear off the BBL)

If a client does have a Bounce Back Loan from the bank and wishes to access a larger facility they would have to clear off the BBL. For example, a client has a BBL with Lloyds for ￡50,000 when taking a larger CBILS loan for ￡250,000 will use the funds to clear the Lloyds facility leaving them with ￡200,000 of new money. Technically they can be running at the same time but the client will have issues when both providers are looking to reclaim the Business Interruption Payment (Set up fees and first years interest) back from the British Business Bank.

• You can have multiple CBILS

It is commonly thought once you have had a CBILS scheme from a bank that you cannot get any more help. Sometimes an applicants bank may limit what the think they should give you based on the bank own assessment of what they have outstanding but the business determines more can be available. Firms can take as many CBILS loans as they like as long as the turnover of 25% is not exceeded.

• You do not have to accept the banks own terms when they are providing CBILS

When a clients bank is offering the CBILS they are sometimes saying they need to withdraw their overdraft or pull out of providing invoice discounting. Effectively they are giving help on the one hand and taking it away with the other reducing the overall benefit to the credit availability of the business. This is based on the banks own view of the exposure and not one that aids the clients firms. It may be worth exploring what options are available elsewhere.

Mark Paddock, Business Finance Consultant @ V4B Business Finance

Tel: 01978 668937 email: [email protected]

If you wish to connect with me on LinkedIn then click here