Announced by the Chancellor during the 2020 Budget, the Coronavirus Business Interruption Loan Scheme (CBILS) opens for applications today and can provide facilities of up to £5m for smaller businesses across the UK who are experiencing lost or deferred revenues, leading to disruptions to their cashflow.

Delivered by the British Business Bank, through 40+ accredited lenders and partners, the Coronavirus Business Interruption Loan Scheme will support the continued provision of finance to UK smaller businesses (SMEs) during the Covid-19 outbreak.

Although the Budget announced that an initial £1.2bn of Government-backed lending would be available through the new scheme, the Government has since announced that it will be demand-led and will be resourced accordingly.

Scheme features

The Coronavirus Business Interruption Loan Scheme supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance facilities. The scheme provides the lender with a government-backed guarantee, potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’.

  • 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.
  • 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 fees¹, so smaller businesses will benefit from no upfront costs and lower initial repayments.²
  • 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.
  • Security: 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. If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
  • The borrower always remains 100% liable for the debt.

Eligibility criteria

Smaller businesses from all sectors³ can apply for the full amount of the facility. To be eligible for a facility under CBILS, an SME must:

  • Be UK based in its business activity, with turnover of no more than £45m per year
  • 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.

If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.

How to apply

CBILS is available through the British Business Bank’s 40+ accredited lenders and partners, which are listed on the British Business Bank website.

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.

Given there is likely to be a big demand for facilities, businesses should:

  • Consider applying via the lender’s website in the first instance. Telephone lines are likely to be busy and branches may have limited capacity to handle enquiries due to social distancing.
  • Consider the urgency of their need – it is possible that some businesses may be looking for regular longer-term finance rather than ‘emergency’ finance, there may be other businesses with a more urgent need to speak with a lender.

Here at Smith Cooper Corporate Finance, our team of specialist advisors are on hand to help you make sense of the types of funding options available to companies and how best to access them. If you require assistance, please don’t hesitate to get in touch.

View full details of the scheme here

 

¹ Following earlier discussions with the banking industry, some lenders indicated that they would not charge arrangement fees or early repayment charges to SMEs borrowing under the scheme. HM Government greatly appreciates this approach by lenders

² Fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment.

³ The following trades and organisations are not eligible to apply: Banks, Building Societies, Insurers and Reinsurers (but not insurance brokers); The public sector including state funded primary and secondary schools; Employer, professional, religious or political membership organisation or trade unions.