Residential property
06 Apr 2020 News

Business Interruption Loan Scheme

Amidst the chaos and unpredictable nature of the Covid-19 outbreak, small and medium-sized businesses (SMEs) across the UK are losing or have lost revenue, and their cashflow has been severely disrupted as a result.  On 11 March 2020 the UK Government announced the inception of the Coronavirus Business Interruption Loan Scheme (CBILS) to provide financial support to SMEs.

The scheme (launched on 23 March 2020) is being delivered by the British Business Bank, who will work alongside accredited lenders, including:

  • high-street banks;
  • challenger banks;
  • asset-based lenders; and
  • smaller specialist local lenders.

It is important to note that if CBILS lenders can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.  CBILS offers a way for lenders to extend finance to businesses who may not have the required security.

The scheme went live on Monday 23 March and will initially run for six months.

Forms of funding available

The scheme aims to provide financial support to help UK businesses access various forms of funding, including:

  • bank loans;
  • overdrafts;
  • invoice finance; and
  • asset finance.

Key Features

  • Finance of up to £5 million (available on repayment terms of up to 6 years for term loans and asset finance facilities and up to 3 years for overdrafts and invoice finance);
  • 80% guarantee (the lender will receive a Government-backed 80% guarantee against the outstanding facility. It is important to be aware that an SME will always remain 100% liable for the debt. The CBILS guarantee is to the lender and not the SME);
  • Interest and fees paid by Government for 12 months (this includes any lender fees e.g. arrangement or early repayment fees).
  • No guarantee fee for SMEs to access the scheme (lenders will pay a fee to access the scheme); and
  • 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).

Eligibility criteria

To qualify under the scheme, an SME must:

  • be a UK based business, with turnover over no more that £45 million per annum;
  • generate more than 50% of its turnover from trading activity;
  • have a borrowing proposal which, were it not for the COVID-19 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; and
  • be for business purposes.

How to apply

CBILS applications can be made directly to a British Business Bank accredited lender of which there are more than 40 to choose from.

Applicants must be able to demonstrate to the lender that were it not for the Covid-19 outbreak, the business would be sustainable and by providing a facility, it will enable the business to trade out of any short-to-medium term difficulty.

It is worth noting that approaching an existing lender directly may prove to be a quicker way to access funds.

These are fast-changing circumstances and to date we have already seen the scheme inundated with over 130,000 enquiries. Since the announcement of the Scheme, the UK Government has removed the requirement for businesses to have first attempted to get a standard commercial loan elsewhere, which should have the effect of increasing the number of applications which will be made under CBILS.

The revamped scheme (coming into effect from Monday 6 April 2020) now also includes Government-backed loans of up to £25 million to business with revenues of between £45 million and £500 million.

If you have any questions about the scheme or would like to discuss your business needs, please contact our Banking and Finance team

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