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Updated Coronavirus Business Interruption Loan Scheme (CBILS)

Today, 3rd April 2020 the Chancellor Rishi Sunak has revealed the urgently awaited overhaul to the Coronavirus Business Interruption Loan Scheme (CBILS) originally introduced on 23 March, and the introduction of a new Coronavirus Large Business Interruption Scheme (CLBILS).

The temporary loan scheme originally announced by the Chancellor has not been without its troubles, with only 983 companies from 130,000 applicants having had their loans approved so far, prompting the Chancellor to take steps to refine and bolster the system by announcing:

A change included in the eligibility criteria “all viable business affected by Covid-19”.

Whereas previously the scheme was only available to small businesses who were unable to secure regular commercial financing, now, all viable small businesses will be eligible for financial support under the scheme if needed in order to remain operational during the crisis.  Businesses must be able to self certify that they have been adversely impacted by the pandemic.

Changes to Personal guarantees

The chancellor has confirmed that lenders are now prohibited from requesting personal guarantees on loans up to £250,000.  Further, for any loans of more than £250,000, personal guarantees will be limited to 20% of any amount outstanding on the CBILS lending after any other recoveries from business assets.  The chancellor once again highlighted that a principal private residence cannot be taken as security to support a personal guarantee or as security for a CBILS backed facility.
This will allow businesses with annual turnover between £45m and £500m to access financial support of up to £25million.

New loan scheme for mid-sized companies

The chancellor in identifying a gap in support has introduced a ‘hybrid’ loan product to support those businesses who fall between the definition of small and large businesses with the new Coronavirus Large Business Interruption Loan Scheme (CLBILS), operated by the Bank of England.  Under the scheme lenders can issue commercial interest rate loans of up to £25million to firms with annual turnovers of between £45m and £500m.  The move is intended to encourage banks to extend credit to businesses with confidence, having the assurance that 80% of loans will be backed by the government.   Further information about CLBILS is expected later this month.

The Chancellor will be meeting with bank chief executives next week to discuss operational pain points to ensure that as many businesses as possible can access to the schemes, as quickly as possible.

Our original update concerning CBILS can be found here.

For details of how to apply for the scheme, and eligibility criteria is available on the British Business Bank website: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils-2/for-businesses-and-advisors/

If you have any questions or concerns about the above please do contact your usual partner:

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