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Coronavirus Business Interruption Loan Scheme (CBILS)

A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, was launched on 23 March 2020 to support businesses to access bank lending and overdrafts. The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value. Businesses can access the first 6 months of that finance interest free, as government will cover the first 6 months of interest payments.

Guidance as to eligibility from British Business Bank (updated 23 March 2020)

The updated eligibility rules per British Business Bank are as follows:

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

It appears that the de-minimis state aid requirement has been removed. The website is also suggesting that there will be significantly fewer excluded trades from the scheme. The excluded trades include:

  • 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.

The updated guidance now extends to fishery, aquaculture and agriculture trades, who can now qualify for the loan but not the interest and fees paid by the government for 12 months.

The key features of the loan scheme are as follows as per the British Business Bank website:

  • 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 (this may be updated as the Chancellor stated this would be increased to 10 year terms)
  • 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
  • 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.

Support for larger firms through the COVID-19 Corporate Financing Facility

The chancellor also advised that more measures would be announced during w/c 23 March 2020 to ensure that medium and larger businesses can also access CBILS.  Under the new Covid-19 Corporate Financing Facility, the Bank of England will buy short term debt from larger companies.  This will support your company if it has been affected by a short-term funding squeeze, and allow you to finance your short-term liabilities. It will also support corporate finance markets overall and ease the supply of credit to all firms. 

When and how this will be available?

The British Business Bank have provided more details on the qualifying criteria for the loan scheme. In order to meet eligibility for CBILS the business must:

  • Be UK based, with turnover of no more than £41 million per annum
  • Operate within an eligible industrial sector (a small number of industrial sectors are not eligible for support – see below)
  • Be able to confirm that they have not received de minimis State aid beyond €200,000 equivalent over the current and previous two fiscal years
  • Have a sound borrowing proposal, but insufficient security to meet the lender’s requirements

There are certain companies that are not eligible to make the claim (https://www.british-business-bank.co.uk/wp-content/uploads/2020/03/Ineligible-and-Restricted-Eligibility-Sector-2017.pdf)

To apply for the funding, a business will need to approach one of the 40+ accredited lenders (https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/accredited-lenders/) directly rather than through the British Business Bank.

As we understand it to date, the scheme will be available to apply for from w/c 23 March 2020.

Further guidance is available here:
https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/

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