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
If you are eligible you will get a taxable grant of 80% of the average profits from the following tax years (where applicable):
2016-2017
2017-2018
2018-2019
HMRC will add the total profit in each of the three tax years (if applicable). This will then determine the monthly payment, subject to the cap of £2500.
Some employers falling into the third group of organisations described above could understandably feel aggrieved that on the first reading of the guidance they are not able to furlough employees and rely on the Government scheme. Many publicly funded organisations that are not public sector employers, receive a package of public funding with little expectation on how that funding is used or applied, other than broadly for it to be used in providing the services it is contracted to deliver. Also, several publicly funded organisations have many different income streams and the element of funding that is received from the public purse can be only an element of their operating costs.
Unfortunately there is still no clear guidance on when employers falling into the third category identified above can use the scheme. The only reference in the guidance on this states that where organisations are not “primarily funded” from the public purse and whose staff cannot be redeployed to assist with the coronavirus response, the scheme might be appropriate to be used for some staff. This seems to suggest that where an employing organisation is not wholly or mainly funded by public funding and staff cannot be redeployed to work in areas in the effort to combat coronavirus, then it would be appropriate for the employer to access the scheme.
If considering applying for grants under the scheme a sensible approach would be to look at the combined total of your public funding and payments under the scheme and make sure it will not represent more than 100% of the level of total income you would have expected to receive during this period in a non-Covid scenario.
Local Authorities are expected to maintain support to suppliers and this should be considered:
The Coronavirus pandemic will have impacted businesses in many different ways, but some of the most likely impacts that could have a legal implication are as follows:
- Services were not performed in accordance with contract during the period of disruption. This could be a reduction in volume of services performed, a suspension of services, or performance in a way that does not comply with contractual KPIs
- Late delivery or non-delivery of goods because of factory closures, or disruption in the supply chain
- Changes being agreed between parties to contracts to deal with the consequences of the Covid-19 outbreak
The application is made via the Companies House website, and only takes a few minutes to complete. Companies House have indicated that the extension is “automatic and immediate” and will be for three months.
Having said that the extension is “automatic”, their website also says that Companies that have already extended their filing deadline, or shortened their accounting reference period, may not be eligible for an extension.
If an extension is granted, it will not affect the due date for filing accounts in future years – so the deadline will revert to the usual date for the next accounting period.
If the business has areas requiring an increased workforce whilst others require a reduced workforce, staff can be retrained and redeployed across the organisation or even across a wider group of companies. This will not reduce the wage bill but will avoid the need for redundancies. Making fundamental changes to an employee’s role and duties will require their agreement following a fair selection and consultation process.