A banking expert answers your frequently asked questions about CIBLS
Phil Brown, head of travel and leisure at NatWest, answers questions about the government’s Coronavirus Business Interruption Loan Scheme and offers tips for creating a sound business proposal for a loan
Which businesses are eligible for the Government’s Coronavirus Business Interruption Loan Scheme (CIBLS)?
To be eligible, a business must be:
- Based in the UK, with a turnover of no more than £45 million per annum
- Seeking a facility up to £5 million
- Able to evidence viability
The minimum loan size that NatWest offers under the CBILS scheme is £5,000. This is lower than any other bank and is available to sole traders and partnerships as well as limited companies.
How do I apply?
The scheme is accessible through businesses’ normal points of contact with lenders. If businesses have concerns about their finances, they should contact their lender for support as early as possible. Businesses do not need to contact the British Business Bank to access this scheme.
What are the pros and cons of applying from a business point of view?
CBILS can be a much-needed source of liquidity to allow the business to keep trading in these unprecedented circumstances. It is worth remembering that this is debt and will be a liability on the business’ balance sheet to be repaid at a point in the future.
What should I be thinking about before taking the loan on?
Key questions businesses should ask themselves include:
- Would the bank have thought my business was viable before the impact of coronavirus?
- How much do I need to borrow to plug the gap between the cash I would normally generate from my business being impacted to the time it begins to recover?
- Are there any alternative sources of liquidity that the business can call upon?
When will it have to be paid back by?
Within six years but no interest is payable in the first 12 months, and it is also fee-free for the first 12 months too. The business applying for a loan can request a Capital Repayment Holiday in the initial period.
Will I have to give a personal guarantee?
NatWest was the first bank to confirm that it will not take personal guarantees in support of CBILS. The government has now instructed other banks and lenders not to request personal guarantees for loans under £250,000 for CBILS.
How long will it take to receive the loan?
We have streamlined our approach and, where possible, have minimised requirements to ensure we can support our customers as quickly as possible.
What advice would you give to travel businesses that don’t qualify? Are there other ways the bank can support me?
Speak to your bank as there are alternatives to consider. This could include accelerating debtor monies, asset finance and willingness to consider capital repayment holidays on existing debt.
Can travel businesses get a deferment on their existing loan/s or asset finance payments?
Every case is different but Capital Repayment holidays for NatWest Group customers are available along with the flexibility to negotiate around other terms and conditions as appropriate.
For more information about CIBLS visit: british-business-bank.co.uk
Top tips for creating a sound business proposal to be considered for CIBLS
- Provide evidence on why the business is viable (up to 12 months prior; plus management information or audited accounts if available) which demonstrates that coronavirus is the problem not the business model.
- Provide a summary of the actions taken or under consideration to mitigate the impact of coronavirus, and the extent to which the business has explored other areas of funding or government support.
- Provide details of any hire purchase or third-party finance commitments, including amount outstanding, repayments and expiry dates.
- Provide a set of forecasts to illustrate the total cash requirement over the next twelve months and the amount of debt you are seeking. Always include details on the assumptions behind financial forecasts and any risk factors that may affect them. I would recommend not being over optimistic about the rebound assumptions, for example, not everyone who didn’t take a summer break is going to want to book a winter sun holiday; habits may have changed, and consumer confidence may take time to return if dented.
- Include some different scenario plans including a “Plan B” with details of the levers that can be applied in order to protect the cash flow and therefore loan repayments if “Plan A” doesn’t quite unfold as anticipated.
- Be realistic about the time it will take to stand up the business once the outbreak has subsided and the cost of doing so.
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