Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS)

Updated as at 3 April 2020

Coronavirus Business Interruption Loan Scheme (CBILS)

What is it?

The Coronavirus Business Interruption Loan Scheme (CBILS) provides financial support to smaller businesses (SMEs) across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak.

Initially, if a lender was not able to extend finance under its normal criteria, then they will look at a business’ eligibility under the loan CBILS, however due to pressure from the press and businesses that were unable to obtain CBILS finance, from 3 April 2020 the government is now taking further action to support firms affected by the COVID-19 crisis by bolstering the scheme.

To maximise the support available, the government is extending the CBILS so that all viable small businesses affected by COVID-19 can access CBILS and not just those unable to secure regular commercial finance. The government is also stopping lenders from requesting personal guarantees for loans under £250,000 (previously this was at the discretion of the lender), this is along with making operational changes to speed up lending approvals. The expanded scheme will be operational with lenders from Monday 6 April 2020.

CBILS gives the lender a government-backed guarantee for the loan repayments to encourage more lending, however the borrower remains fully liable for the debt.

Who is eligible?

Your business must:

  • Be UK-based in its business activity
  • Have an annual turnover of no more than £45 million
  • Have a borrowing proposal which the lender:
    • would consider viable, were it not for the COVID-19 pandemic
    • believes will enable you to trade out of any short-term to medium-term difficulty

Businesses from any sector can apply, except the following:

  • Banks and building societies
  • Insurers and reinsurers (but not insurance brokers)
  • Public-sector organisations, including state-funded primary and secondary schools
  • Employer, professional, religious or political membership organisations
  • Trade unions

Key Features of the Scheme

Finance of up to £5 million

  • The maximum value of a facility provided under the scheme is £5 million, available on repayment terms of up to six years.

Guarantee to the lender to encourage them to lend

  • The scheme provides the lender with a government-backed, partial guarantee against the outstanding balance of the finance.
  • The borrower remains 100% liable for the debt.

Government pays interest and fees for 12 months

  • The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied charges

Finance terms

  • For term loans and asset finance facilities: up to six years.
  • For overdrafts and invoice finance facilities: up to three years.

Security

  • Insufficient security is no longer a condition to access the scheme.
  • For all facilities, including those over £250,000, CBILS can now support lending to smaller businesses even where a lender considers there to be sufficient security, making more smaller businesses eligible to receive the Business Interruption Payment.
  • No personal guarantees for facilities under £250,000.
  • Personal guarantees may still be required, at a lender’s discretion, for facilities above £250,000, but they exclude the Principal Private Residence (PPR) and recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied.

No guarantee fees for businesses

  • There are no guarantee fees for SMEs.
  • Lenders pay a fee to access the scheme.

How to apply

The CBILS is available through more than 40 accredited lenders across the UK. Additional lenders are applying and successfully gaining accreditation, which is creating more choice and diversity of supply for small businesses.

See the link from BBB for details on steps how to apply and the list of lenders.

https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils-2/for-businesses-and-advisors/

In the first instance, businesses should approach their own provider – ideally via the lender’s website (due to the large volume of calls at present).

Lending Criteria and Viability

Please note all lending decisions remain fully delegated to the accredited lenders. Therefore, each lender will have its own specific requirements and can make their own lending decisions.

At present the majority of lenders are only providing CBILS to existing customers.

The business must have a borrowing proposal which, were it not for the COVID-19 pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty.

The scheme is designed to support those business that were trading successfully before COVID-19, but now face difficulties as a result.

Normal finance applications will need to be completed, which means a sound borrowing proposal. It is not known what the individual lenders require, however we can assume the following as part of a proposal:

  • Recent submitted accounts
  • Management accounts
  • Profit forecast (with detailed commentary)
  • Cashflow forecast (with detailed commentary)
  • Details of level of funding needed.

Commentary is very important, commentary needs to cover where the business was before the crisis, what the crisis has done to the business and how finance will help business overcome the short-medium terms impacts of COVID-19.

If the application is unsuccessful, businesses can go to another lender.

 

Coronavirus Large Business Interruption Loan Scheme (CLBILS)

This scheme was announced on 3 April 2020 and it follows on from the CBILS for larger companies. CLBILS will breach the gap between large companies which do not have an investment grade or a material impact on the economy and give these businesses access to finance in these difficult times.

It will provide a government guarantee of 80% to enable banks to make loans of up to £25 million to firms with an annual turnover of between £45 million and £500 million.

This will give banks the confidence to lend to more businesses which are impacted by COVID-19 but which they would not lend to without CLBILS. Loans backed by a guarantee under CLBILS will be offered at commercial rates of interest.

Further details of the scheme will be announced later this month.

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