CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME

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.

The scheme is a part of a wider package of government support for UK businesses and employees. Read more at the Government’s Business Support website.

CBILS has been significantly expanded along with changes to the scheme’s features and eligibility criteria. The changes mean even more smaller businesses across the UK impacted by the coronavirus crisis can access the funding they need.

Importantly, access to the scheme has been opened up to those smaller businesses that would have previously met the requirements for a commercial facility but would not have been eligible for CBILS. Insufficient security is no longer a condition to access the scheme.

This significantly increases the number of businesses eligible for the scheme.

HOW IT WORKS

British Business Bank operates CBILS via its accredited lenders. There are over 40 of these lenders currently working to provide finance. They include:

  • high-street banks
  • challenger banks
  • asset-based lenders
  • smaller specialist local lenders

A lender can provide up to £5 million in the form of:

  • term loans
  • overdrafts
  • invoice finance
  • asset finance

CBILS gives the lender a government-backed guarantee for the loan repayments to encourage more lending.

The borrower remains fully liable for the debt.

Under the scheme, personal guarantees of any form will not be taken for facilities below £250,000.

For facilities above £250,000, personal guarantees may still be required, at a 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 CBILS-backed facility
  • The maximum value of a facility provided under the scheme is £5 million, available on repayment terms of up to six years.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.
  • 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.
  • 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.
  • There are no guarantee fees for SMEs. Lenders pay a fee to access the scheme.
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 current pandemic
  • Self-certify that it has been adversely impacted by the coronavirus (COVID-19)
  • Not have been classed as a “business in difficulty” on 31 December 2019, if applying to borrow £30,000 or more

Lenders will need further information to confirm eligibility. All lending decisions remain fully delegated to the 40+ accredited lenders.

Businesses from any sector can apply, except the following:

  • Banks, insurers and reinsurers (but not insurance brokers)
  • Public-sector bodies
  • State-funded primary and secondary schools
HOW TO ACCESS THE SCHEME

Note: There is high demand for CBILS facilities. Phone lines are likely to be busy and branches may not be able to handle enquiries in person.

Not every accredited lender can provide every type of finance available under CBILS, and the amount of finance offered varies between lenders. Please see individual lenders’ websites for more information on the amounts they are able to offer.  Once you have applied:

1.             THE LENDER MAKES A DECISION

The lender has the authority to decide whether to offer you finance.

Under the scheme, lenders will not take personal guarantees of any form for facilities below £250,000.

For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, 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
2.             IF THE LENDER TURNS YOU DOWN

If one lender turns you down, you can still approach other lenders within the scheme.

Access to the scheme has now been opened up to smaller businesses facing cashflow difficulties who previously would not have been eligible for CBILS because they met the requirements for a standard commercial facility.

You may therefore consider re-contacting your lender if you have previously been unsuccessful in securing funding.

WHAT LENDERS WILL NEED FROM YOU

When you apply for a business loan, most lenders will ask you for the following:

DETAILS OF THE LOAN
  • The amount you would like to borrow
  • What the money is for — the lender will check that it’s a suitable business purpose and the right type of finance for your needs
  • The period over which you will make the repayments — the lender will assess whether the loan is affordable for you
SUPPORTING DOCUMENTS

You will need to provide certain documents when you apply for a CBILS-backed facility. These requirements vary from lender to lender, but are likely to include:

  • Management accounts
  • Business plan
  • Historic accounts
  • Details of assets

If you do not have everything listed here, a CBILS loan could still be an option to provide finance to support your business.

Note: For many customers approaching their existing lenders for a smaller facility, the process may be automated and therefore may not require the same level of documentation.

To find out which lenders are able to offer CBILS click HERE.

CORONAVIRUS LARGE BUSINESS INTERRUPTION LOAN SCHEME (CLBILS)

The Large Business Interruption Loan Scheme (CLBILS), is applicable for businesses with annual turnover of £45-£500 million.  The Government will guarantee of 80% for loans of up to £25 million for firms within these turnover thresholds. Unlike the scheme for small to medium sized businesses, large businesses will not get a 12-month holiday on paying the interest and fees involved.  Click HERE to find out more about CLBILS.