Coronavirus business interruption loan scheme expanded to benefit more smaller businesses across the UK
The Coronavirus Business Interruption Loan Scheme (CBILS) has been significantly expanded along with changes to the scheme’s features and eligibility criteria.
The changes mean even more smaller businesses across the UK impacted by the coronavirus crisis can access funding.
Importantly, access to the scheme has been opened up to those smaller businesses that would have previously met the requirements for a commercial facility but would not have been eligible for CBILS. This significantly increases the number of businesses eligible for the scheme.
Since CBILS launched less than two weeks ago, almost 1,000 facilities valued at £90.5m have been approved by lenders accredited to the British Business Bank’s CBIL Scheme. More than 80% of the UK’s smaller businesses have a finance relationship with CBILS accredited lenders.
The first facility was delivered under the scheme by Yorkshire-based Skipton Business Finance, with other lenders including the Business Enterprise Fund, Newable Business Loans, the Northern Powerhouse Investment Fund, Finance For Enterprise, Danske Bank, Clydesdale Bank and HSBC. The number of providers of the scheme will continue to grow and new alternative finance lenders will continue to be accredited to the scheme creating more choice and diversity of supply for smaller businesses.
About the scheme
The CBILS, delivered through 40+ British Business Bank accredited lenders, is designed to support the continued provision of finance to UK smaller businesses (SMEs) during the COVID-19 outbreak. The scheme enables lenders to provide facilities of up to £5m to smaller businesses across the UK who are experiencing lost or deferred revenues, leading to disruptions to their cashflow.
It supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance facilities.
Updated scheme features
- No personal guarantees for facilities under £250k: Personal guarantees of any form cannot be taken under the scheme for any facilities below £250k.
- Personal guarantees for facilities above £250k: Personal guarantees may still be required, at a lender’s discretion, 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 CBIL backed facility.
- 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. Please note that where there is sufficient security available, it is likely that the lender will take such security in support of a CBILS facility.
We have communicated that these changes should be retrospectively applied by lenders for any CBILS facilities offered since 23 March 2020. For any commercial (non-CBILS) facilities offered since the same date, providing the borrower meets the CBILS eligibility criteria, lenders have been asked to bring these facilities onto CBILS wherever possible (e.g. where the lender is accredited to offer the same facility through CBILS) and changes retrospectively applied as necessary.
Existing scheme features
- Up to £5m facility: The maximum value of a facility provided under the scheme is £5m, available on repayment terms of up to six years.
- 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.
- 80% guarantee: The scheme provides the lender with a government-backed, partial guarantee (80% gross) against the outstanding facility balance, subject to an overall cap per lender.
- Principal Private Residence (PPR): A borrower’s/guarantor’s PPR cannot be taken as security to support a Personal Guarantee or as security for a CBIL backed facility.
- The borrower always remains 100% liable for the debt.
New eligibility criteria
Smaller businesses from all sectors can apply for the full amount of the facility. To be eligible for a facility under CBILS, a smaller business 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.
- Self-certify that it has been adversely impacted by coronavirus (COVID-19).
Keith Morgan, Chief Executive, British Business Bank, said: “It was essential to get the Coronavirus Business Interruption Loan Scheme up and running as quickly as possible to get additional funding flowing to smaller business. We have seen an incredible demand for CBILS since it launched, so opening up access to the scheme to even more smaller businesses across the UK will enable lenders to expand their support, deploying vital funding where it is most needed.”
How to apply
CBILS is available through the British Business Bank’s 40+ accredited lenders, 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. Not every accredited lender can provide every type of finance available under CBILS.
Further details about the CBILS scheme including updated information and FAQs for SMEs are available from the British Business Bank.
Further information is also provided in the CBILS SMEs Factsheet.
In addition, ICAS comments that:
- the lack of loan eligibility for pre-profit VCT and EIS companies is recognised by government but for such companies equity is more suitable than debt to meet their funding needs. Innovative funding structures should also be considered. Please share with us your ideas.
- There is an opportunity to streamline and speed up the process for paying R&D and other tax credits to aid tech and growth companies. Read more in this ICAS article ‘HMRC Update on R&D in the light of COVID-19’.
How are the COVID-19 business support schemes working for you? Please email atelfer@icas.com with your ideas on how to better meet funding gaps.
