Who is eligible for CBILS?
To be eligible for CBILS, the British Business Bank has confirmed that businesses should be able to answer YES to the following points:
- Your application must be for business purposes
- You must be a UK-based SME with an annual turnover of up to £45m. This includes sole traders, freelances, body corporates, limited partnerships and limited liability partnerships. For sole traders to be eligible it is expected that sole traders will need to have a business account with its funders and not be operating via a personal account
- Your business must generate more than 50% of its turnover from trading activity
- Your CBILS-backed facility will be used to support primarily trading in the UK
- You wish to borrow up to a maximum of £5m.
Businesses meeting these criteria from all sectors can apply save for Banks, Building Societies, Insurers and Reinsurers (but not insurance brokers), the public sector including state-funded primary and secondary schools, employer, professional, religious or political membership organisation or trade unions which are not eligible.
Your borrowing proposals must be considered viable by the relevant lender under normal circumstances aside from the Covid-19 outbreak, and the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty. Lending decisions are delegated to the accredited lenders and lenders will need further information to confirm eligibility.
The eligibility criteria for CBILS does not require lenders to take into account other forms of Government support that SME’s may already be benefiting from, most notably business rate relief.
We understand that ownership structure is not taken into account when confirming eligibility and that businesses back by a PE funder or a subsidiary of an overseas entity can be eligible if it meets the other criteria.
An update on eligibility – 3 April 2020
Previously, for facilities above £250,000, the lender must establish a lack or absence of security prior to businesses using the Scheme. The requirement for insufficient collateral has been removed allowing those SMEs who are considered to have sufficient collateral to access the Scheme. We would expect that where security is available, a lender will seek to take security over the relevant assets.
Related FAQs
Where it is envisaged that 20 or more employees will be dismissed at a relevant establishment within a 90 day period or less, then collective consultation is required (in addition to individual consultation) and the company must inform BEIS (using form HR1).
If there are less than 20 dismissals then you are only required to carry out individual consultation.
Crucially the phrase “force majeure” has no specific meaning in English law. As a result, there is scope for complex legal argument, including as to whether the effects of the coronavirus outbreak can amount to force majeure in the first place. If the coronavirus crisis deepens, force majeure provisions could become relevant in the following ways:
- suppliers to your business might seek to invoke force majeure
- you may need to invoke force majeure under your own contracts
Each of these will need careful analysis of the relevant contract against the applicable factual background. Unfortunately, the position is unlikely to be clear cut.
That will depend on the terms of your facility and the stance taken by your bank.
Banking facilities often place obligations on businesses to stick to certain financial criteria. For example, an obligation to keep turnover or profit above certain levels or a commitment to keep the bank’s exposure within an agreed percentage of the value of the company’s assets (known as loan to value ratio).
The consequences of breaching those covenants will depend on the terms of your facility, but normally this amounts to an event of default. Events of default can result in the loan (or whatever form the facility takes) becoming repayable and could give the bank certain powers to take action to recover the money that they are owed.
Whether the bank will take action during these unprecedented times is another matter, particularly given the extent of support being offered to businesses via mainstream lenders and the political desire to keep viable businesses up and running. Lenders themselves will no doubt wish to remain supportive where possible. The underlying performance of the business (and whether but for the effects of Covid-19 it would have been in a healthy financial position), the relationship you have with the bank and your history with them will no doubt be relevant to the approach taken by the bank. However, early engagement with your bank (as well as other key stakeholders in the business) will be important.
No. You should always treat employees consistently and fairly, but this doesn’t mean treating them all the same, or applying the same requirements. For those employees who have been homeworking and doing so without any problems, then they should be allowed to continue to do so.
We would anticipate that the vast majority, if not all, businesses will be approaching the return on a phased basis, which inevitably means some employees returning to work sooner than others. In reality then, you aren’t treating everyone the same, but try to be fair and consistent; you need to do what works best from a business perspective, but can you rotate people, require them to come in at different times etc. Where people perceive that the planned return is being worked out fairly they are far more likely to buy into this, which will help avoid resentments building up between colleagues.
If a business has been provided with a loan from 23 March on commercial terms, providing the borrower meets the CBILS eligibility criteria, lenders have been asked to bring these facilities onto CBILS wherever possible (e.g. where the lender is accredited to offer the same facility through CBILS) and changes retrospectively applied as necessary. Please contact us if this applies to you and we can review facilities and advise upon the potential changes that may be made retrospectively to the benefit of the business.