Coronavirus Business Interruption Loan Scheme
Note: the Coronavirus Business Interruption Loan Scheme closed to new applications on 31 March 2021. Visit our Coronavirus Hub for the latest information on funding options.
The Coronavirus Business Interruption Loan Scheme (CBILS) is designed to assist qualifying businesses during these unprecedented times.
The Scheme aims to support long-term viable businesses who may need to respond to cash-flow pressures by seeking additional finance. The loan will be provided by the British Business Bank through participating providers during the COVID-19 outbreak.
The Chancellor Rishi Sunak announced on 3 April that the Government is taking further action to support firms affected by the Coronavirus crisis by bolstering business interruption loans for small businesses and announcing a new scheme for larger companies.
The expanded scheme was operational from Monday 6 April 2020.
To be eligible for lending the business must:
- Be UK based with a turnover of less than £45m
- Operate within an eligible sector and generate more than 50% of turnover from trading activity
- Have a sound borrowing proposal but insufficient security to meet a lender’s normal requirements
- Up to £5m facility: the maximum value of a facility provided under the scheme will be £5m, available on repayment terms of up to six years.
- Finance available: support can be in the form of term loans, Invoice or Asset Finance or overdrafts
- 80% guarantee: the scheme provides the lender with a government-backed, partial guarantee (80%) against the outstanding facility balance, subject to an overall cap per lender.
- No guarantee fee for SMEs to access the scheme: no fee for smaller businesses. Lenders will pay a fee to access the scheme.
- Interest and fees paid by Government for 12 months: the Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.
- Finance terms: finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.
- Loans in the scheme are limited to a maximum of 25% of 2019 turnover or double the annual wage bill, whichever is greater.
- The High Street Banks, for the most part, are ONLY offering this loan to existing clients.
Updates from 3 April
- No personal guarantees in any form for facilities under £250k
- Personal guarantees for facilities above £250k (capped). Personal guarantees may still be required (lender’s discretion) but 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.
- A Principal Private Residence (PPR) cannot be taken as security to support a personal guarantee or as security for a CBIL backed facility.
- Insufficient security no longer a condition to access the scheme. 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.
The borrower always remains 100% liable for the debt.
Updates from 30 July 2020
From 30 July 2020, criteria around the classifications of businesses in difficulty will change following recent EU changes in State Aid Law around the test for businesses.
The amendment means that smaller businesses with fewer than 50 employees and less than £9,000,000 in annual turnover and/or annual balance sheet will not be considered undertakings in difficulty unless they are:
- subject to collective insolvency procedure under national law, or
- in receipt of rescue aid (which has not been repaid) or restructuring aid (and are still subject to a restructuring plan).
Smaller businesses with more than 50 employees or more than £9,000,000 in annual turnover and/or annual balance sheet will still be subject to the ‘Undertaking in Difficulty’ test.
Updates from 25 September 2020
From 25 September 2020 the guidance allows for the ‘undertaking in difficulty’ assessment to be determined at the date of application for the schemes. Businesses that were ‘undertakings in difficulty’ on 31 December 2019 but are no longer ‘undertakings in difficulty’ will be (in principle) eligible for the schemes.
This flexibility means that businesses can take action to convert their debt (for example, in the form of loan notes) to shares (equity) in order to qualify for the schemes, giving them the option to restructure their finances before application so they may become eligible.
CBILS is available through the British Business Bank’s 40+ accredited lenders, which are listed on the British Business Bank website here.
In the first instance, businesses should approach their own provider – ideally via the lender’s website. They may also consider approaching other lenders if they are unable to access the finance they need.
Decision-making on whether you are eligible for CBILS is fully delegated to the 40+ accredited CBILS lenders. These lenders range from high-street banks, to challenger banks, asset-based lenders and smaller specialist local lenders.
To discuss any funding requirements you may have at this exceptional time, or any cash flow related matters, please get in touch on 01903 234094.