In the Budget on Wednesday 11 March 2020, the Chancellor announced a Coronavirus Business Interruption Loan Scheme (CBILS), under which the UK government will guarantee 80% of certain new loans and other finance facilities up to £5m for SMEs who are experiencing lost or deferred revenues, leading to disruptions to their cashflow.
The scheme is designed to support smaller businesses (SMEs) who don’t meet a lender’s normal lending requirements for a fully commercial loan or other facility, but who are considered viable in the longer-term.
It will be provided by the British Business Bank through participating providers. The scheme provides the lender with a government-backed guarantee against the outstanding facility balance, potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’. Note though that the borrower always remains 100% liable for the debt.
The UK Government will also cover the first twelve months of interest payments.
The British Business Bank is in the process of defining and agreeing the scheme’s details, specifications and eligibility.
The scheme went live on Monday 23 March and will initially run for six months. However, the Government has confirmed that the amount of funding available under the scheme will be demand-led.
Therefore, there is no immediate need to approach a lender if you do not need finance in the short-term.
The scheme is open to sole traders, freelancers, body corporates, limited partnerships, limited liability partnerships or other legal entities – as long as the business activity is operated through a business account. Full eligibility criteria are expected to be published this week, however, to be eligible, parties must:
- Be UK based in its business activity.
- Generate more than 50% of its turnover from trading activity.
- Have <£45 million turnover per annum.
- Operate within an eligible sector (ineligible businesses include : Banks, Building Societies, Insurers and Reinsurers (but not insurance brokers); the public sector including state funded primary and secondary schools; and employer, professional, religious or political membership organisation or trade unions.
- Have a borrowing proposal which, were it not for the current 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.
- Any previous de minimis state aid received does not impact upon eligibility for CBILS and does not need to be taken into account by the lender.
The eligibility criteria for CBILS does not require lenders to take into account the other forms of government support that SMEs may be benefiting from e.g. business rate reliefs or grants unrelated to the CBIL scheme.
- Maximum facility value of £5 million.
- There is no guarantee fee for SMEs to use the CBILS scheme. Lenders will pay a fee to access the scheme.
- Twelve-month interest free period. The Government will make a Business Interruption Payment to cover the first twelve months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.. However, fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment.
- Terms are up to six years for term loans and asset finance facilities; and up to three years for overdrafts and invoice finance facilities.
- At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under.
- For facilities above £250,000, the lender must establish a lack or absence of security prior to businesses using CBILS. Primary Residential Property (PPR) cannot be taken as security under the scheme.
Qualifying business finance products
- Term facilities
- Invoice finance facilities
- Asset finance facilities
Overview of application process
We expect further details to be released this week in terms of how businesses can get access to the CBILS scheme. We will update this page as and when further details are released and as we get further clarity from the banks involved in this scheme.
CBILS is available through the British Business Bank’s accredited lenders.
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 eligibility for CBILS is fully delegated to the accredited CBILS lenders. These lenders range from high-street banks, to challenger banks, asset-based lenders and smaller specialist local lenders.
Businesses must show in their borrowing proposal that, were it not for the COVID-19 pandemic, the business would be considered viable by the lender, and that the provision of finance will enable the business to trade out of any short-to-medium term difficulty.
How we can help
Please get in touch if you need to find out more about the CBILS and some practical guidance on what may be required from banks in order to gain access to this key funding scheme.
Note: the contents above are based upon latest information available at time of publication 23 March 2020 at 2.00pm and subject to change as further details of the scheme are published.