Financial support for SMEs: The Coronavirus Business Interruption Loan Scheme (CBILS)

This scheme provides facilities of up to £5m and for up to six years for smaller businesses (SMEs) across the UK which are experiencing lost or deferred revenues, leading to disruptions to their cashflow. 

This scheme is one of the Government’s initiatives to support businesses, enabling them to keep operating in the face of the global economic emergency brought on by coronavirus. 

On 3 April, the Government announced improvements to bolster the scheme. The changes, reflected below, should apply retrospectively. A welcome feature is that they restrict lenders’ ability to require personal guarantees. Insufficient security is no longer a condition to access the scheme. Access to the scheme has now been opened up to smaller businesses facing cashflow difficulties which previously would not have been eligible for CBILS because they met the requirements for a standard commercial facility.

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

The Government will pay to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will not face any upfront costs and will benefit from lower initial repayments.

This scheme is available through 40+ participating commercial lenders, backed by the British Business Bank. It is intended initially to run for six months. 

Information on the scheme is available on the British Business Bank website HERE.

Key features

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 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: 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:

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.

Liability: the borrower always remains 100% liable for the debt.

Eligibility

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

Smaller businesses from (nearly) all sectors 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 annual turnover of no more than £45m;

have a borrowing proposal which, were it not for the COVID-19 pandemic, would be considered viable by the lender; 

self-certify that it has been adversely impacted by the coronavirus;

not have been classed as a “business in difficulty” on 31 December 2019, if applying to borrow £30,000 or more. The FAQs (link under Further information below) explain in detail the meaning of “business in difficulty for this purpose”.

For applicants acting as part of a group, that have partners or linked enterprises, the turnover assessment should take the latest turnover of the applicant, as shown in their accounts, together with the turnover of any linked enterprises, any partners of any linked enterprises, any enterprises linked to any of the applicant’s partners and any enterprise linked to the applicant’s linked companies.  See the FAQs for the meaning of some of these expressions.

You can use this quick eligibility checklist HERE.

You are not eligible if you fall into any of the following categories of trades and organisations:

banks, insurers and reinsurers (but not insurance brokers); 

public sector bodies including state funded primary and secondary schools.

How to access the scheme

You should approach one of the British Business Bank’s 40+ accredited lenders, which are listed on the British Business Bank website HERE.

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

Make the approach via the lender’s website - In the first instance, you should approach your own provider. Then consider approaching other lenders if your own provider is unable to provide the finance you need. Ideally make the approach via the lender’s website. Telephone lines are likely to be busy and branches may not be able to handle enquiries in person.

The lender has the authority to decide whether to offer you finance. If one lender turns you down, you can still approach other lenders within the scheme. As the scheme has been opened up, you could consider re-contacting your lender if you were previously unsuccessful.

These lenders range from high-street banks, to challenger banks, asset-based lenders and smaller specialist local lenders.

To learn more about lenders’ requirements, see the Better Business Finance lending application checklist HERE.

Further information 

Further information is available in the CBILS FAQs for SMEs document HERE. (Note that new FAQs were added on 20 April 2020).

This scheme has been adjusted from time to time since it was launched, and may continue to be adjusted, so do return to the website pages for updates.

You can read our article on The COVID-19 Corporate Financing Facility, providing financial support for larger firms HERE.

You can read our article on the Coronavirus Large Business Interruption Loan Scheme (CLBILS) HERE.

You can read our article on the Bounce Back Loan Scheme (BBLS) HERE. (The BBLS website pages state that following the launch of the BBLS the minimum for term loans and overdrafts under CBILS will be £50,001. They also state that an eligible business which has already received a term loan of up to £50,000 under the CBILS will have until 4 November 2020 to arrange to transfer it into the BBLS if it so wishes. At the time of writing, the CBILS website pages have not been changed to reflect this information.)

If you have any queries regarding this matter please contact either of the authors or another member of the Corporate team