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CBILS – Why it’s important to the hospitality sector and how it could help you

The Coronavirus Business Interruption Loan Scheme, delivered through 60+ British Business Bank accredited lenders, is designed to support the continued provision of finance to UK smaller businesses (SMEs) during the COVID-19 outbreak. The scheme enables lenders to provide facilities of up to £5m to smaller businesses across the UK who are experiencing lost or deferred revenues, leading to disruptions to their cash flow. It’s part of the Government’s package of support during the COVID-19 pandemic to ensure SMEs can access the funding they need in these challenging times.

With it being such a turbulent time for many businesses, financial support is an avenue that many will be exploring at this difficult time. David Castling, Director of Intermediary Lending at Atom bank offers insight into how businesses within the hospitality sector could benefit from CBILS:

“As rightly pointed out by the Chancellor this week the Hospitality, Food & Accommodation sector has been left reeling throughout the COVID-19 crisis. The extensive forced lockdown coupled with the logistical challenges of attempting to re-open whilst maintaining social distancing and engender consumer confidence, has presented extreme challenges for the survival of many businesses.

“It is pleasing to see that government intervention looks set to continue in this area with the introduction of a VAT reduction from 20% from 5% for the next 6 months, and subsidised meals in August to prime the pumps in regards to footfall. A clear attempt to create a soft landing as the furlough scheme comes to an end in October has been signalled with £1k bonus payments being awarded to businesses who bring staff back and retain them subject to certain conditions.

“All good stuff.

The struggle is real, but so are the solutions.

“We know those operating in the front end food and hospitality sector have had a substantial period of closure, and many, although permitted to open, are cautious about doing so. The financial impact for these businesses has been substantial and likely to be mid-long term.

“Those who have opened face trading in such a reduced capacity that their previous commercial model may no longer be viable. How many pubs/restaurants/cafes can make it on a 3rd of their normal customer bases if 2m social distancing remains in force?

“For businesses to survive they will need to adapt, and to adapt can cost money; which is where initiatives such as the Coronavirus Business Interruption Loans Scheme (CBILS) come in.

“One of the early initiatives introduced and still available is the Coronavirus Business Interruption Loan Scheme (CBILS). This has allowed bank enabled, but government-backed loans, to be offered to good businesses that would be thriving under normal, non-Covid conditions. These loans are competitively priced and do not incur any upfront fees for the customer – something that has never been more important as it is right now.

“With the combined strength of the variety of government initiatives and the ingenuity and entrepreneurial spirit of our “nation of shopkeepers” there are definitely reasons here to be hopeful. Atom bank has continued to provide loans to businesses throughout the crisis and the area of highest demand has been within the Food, Hospitality and Accommodation sector – no-one seems ready to throw in the towel just yet!

“We have had everything from high end, multi-million pound conference centres through to high street bistro’s all seeking finance that will buy them time and see them through the next period of uncertainty, with the hope of returning to some kind of normal (normalish?) trading behaviour next year. The cash made available is being used for everything from refinancing existing debt to bring payments down and aid affordability, wages, rent, stock, business adaption and in some cases expansion.

“It is clear that this sector is so large in terms of both the employment it creates (in particular for younger people), and also the revenue it generates for the UK economy – it is vital that it not only survives but finds a way to thrive.”

What does the CBILS application process look like? Step-by-step guide

The Coronavirus Business Interruption Loan Scheme, delivered through 60+ British Business Bank accredited lenders, is designed to support the continued provision of finance to UK smaller businesses (SMEs) during the COVID-19 outbreak. The scheme enables lenders to provide facilities of up to £5m to smaller businesses across the UK who are experiencing lost or deferred revenues, leading to disruptions to their cash flow. It’s part of the Government’s package of support during the COVID-19 pandemic to ensure SMEs can access the funding they need in these challenging times.

With it being such a turbulent time for many businesses, financial support is an avenue that many will be exploring at this difficult time.

David Castling, Director of Intermediary Lending at Atom bank details what the CBILS application process looks like for businesses, and what you need in order to apply.

Application steps

Understand what it is you actually want/need. CBILS has been initiated to support businesses through a stage of acute shock – what we mean by this is that under normal (Non-Covid) circumstances these businesses would be thriving and be accepted by the majority of banks, should they need to apply for finance. The scheme allows trading businesses to apply for funds based on a portion of their turnover or their liquidity needs for the next 18months. It is vital that a thorough understanding of what this is, and crucially that enough money is applied for by the company to fully implement a recovery plan for the business, are both done in the right way.

Get some advice. At Atom we only accept commercial loan applications from a panel of suitably qualified and experienced commercial finance brokers. We strongly believe that for customers to get the right solution for their business that there is a huge amount of value to be had in speaking to someone who has a good view of what the market is doing. An independent broker can guide the business through the best solution and in turn the best lender to meet the needs of the firm. A good broker will be able to help you avoid any potential pitfalls and also evaluate immediately if your potential application would meet the baseline eligibility of both the CBILS scheme and the lending criteria of the selected lender. We understand that no business seeking finance wants to be turned down, but the only kind of good “No” is a quick one, this will save time and effort on your part and allow you to seek alternative solutions. Helpfully, we publish the list of brokers we deal with on our website for those that need a helping hand at a difficult time.

Preparing for your loan application. Your broker will be able to guide you through the application process with your selected lender, unsurprisingly these can vary a little from lender to lender and as such, it is better to make sure you have everything you need to support your application before your broker sends in the application form. The more effort put in at this stage, the slicker and speedier the loan application process will be. At Atom we would require a number of things to enable us to fully understand your business and evaluate your loan application. At Atom we would typically require the following:

  • Application Form
  • CBILS Supplementary Form
  • ALIE (Assets, Liabilities, Income, Expenditure)
  • Accounts for the last 2 years
  • Up to date Management Information
  • Consent to credit search

Application Submission. Your broker, having compiled the list of supporting documents, will submit these with your application to the lender who will then review everything provided and carry a number of background checks on you and your business. Providing these meet both the credit policy of the lender and the eligibility for the CBILS scheme your application will progress to the next stage.

Agreement in Principle (AIP). At this stage the lender will be able to give a decision on whether or not they are able to provide you finance, at this stage we call this an Agreement in Principle. This agreement is subject to a suitable valuation being carried out and the completion of all required legal work.

Valuation/Legal process. A suitably qualified valuer will be instructed to carry out a valuation on your business premises, where they will visit the business and return a valuation figure to the lender for review. Additionally, at this stage, a suitably qualified law firm will be instructed to carry out the legal work required associated with a loan application that is secured on your business

Loan Offer. Providing that the business has been valued in line with initial expectations and that the applications still meets all other criteria, the lender will be able to provide a full loan offer to you at this stage.

Completion. Subject to the full completion of the all legal work, the lender will liaise with you and your broker to establish the completion date and when the money will be released to you.

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