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Coronavirus Business Interruption Loan Scheme (CBILS): 6 questions to ask yourself before making an application

The Coronavirus Business Interruption Loan Scheme (CBILS) launched at the end of March 2020, offering SMEs (those with a turnover less than £45m) funding of up to £5 million, and no interest payments for the first 12 months.

There are now more than 50 accredited lenders that borrowers can approach.

But before you apply to CBILS, it’s useful to know what makes an application successful. We spoke with Chris Lowe, advisor at Ernst & Young (EY), who highlighted six questions that all borrowers should be able to answer before seeking funding from the scheme.

1. Was my business a viable lending proposition before COVID-19?

First, consider whether asking for a business loan would have been a credible thing for you to do before COVID-19 hit, and, if so, why that is.

CBILS asks that businesses put forward a borrowing proposal that a lender would consider viable, were it not for the current pandemic. The lender must also believe that giving you the loan will enable your business to overcome any short-term to medium term difficulty.

2. What have I done already to limit the impact of COVID-19?

Before you apply for a CBILS loan, outline what self-help measures your business has taken (or plans to take) to lessen the effect of coronavirus. For example, have you:

  • cut directors’ salaries?
  • deferred bonuses?
  • kept your working capital under control?

3. Have I accessed all other relief measures that are available?

You will also need to make clear whether you have accessed other types of financial support for which your business is eligible. This could be placing employees on furlough, deferring VAT payments or deferring rent.

It’s extremely important to set this out in your application, as banks – typically lenders of last resort – are likely to turn you down otherwise.

4. Have I approached my existing lenders and investors for funding support?

If you are a private company, this is a very difficult time. Even the most high-profile companies are struggling due to a lack of cash.

Is there anything that your existing lenders or investors can help you with financially? Their knowledge of your business will already be very detailed, and it will be in their best interest to continue supporting you through recovery if they have the means to do so.

5. Am I clear on how I will repay the CBILS debt as well as any other existing debt?

It’s vital to have a plan in place for repaying the CBILS loan along with any existing debt you might have incurred. Ernst & Young expects to see many more corporate challenges in the coming months as repayments fall due at the same time businesses are trying to rebuild.

6. Can I demonstrate I have a credible plan for recovering the business after COVID-19?

Finally, you will need to share a forecast that clearly outlines:

  • the action you are taking to support your business’ recovery from the coronavirus outbreak
  • the likely trajectory and speed of that recovery
  • plans for different scenarios to reflect various levels of sensitivity and duration

For more information and guidance on how to create a CBILS application, read our recent Q&A with Ernst & Young.


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