How does the Coronavirus Business Interruption Loan Scheme work?


The UK Government has created a number of measures to support businesses during the COVID-19 pandemic.

One of the key initiatives is the new Corona Virus Business Interruption Loan Scheme (CBILS). The CBILS facility was rather hurriedly created and therefore rather than it being a completely new scheme, it is in effect a reworking of the Enterprise Guarantee Scheme (EFG).

The scheme is operated by the British Business Bank (BBB) through a network of Lenders that includes the main High Street banks plus other accredited Lenders such as Asset Based Lenders (ABL). The BBB has invited new Lenders to add to the existing list in order to make the scheme as accessible as possible to SMEs.

Initially the scheme was limited to businesses with turnover up to £45m, however after some pressure this has now been expanded to cover businesses up to £500m turnover.

For businesses up to £45m the maximum loan is £5m and for those over £45m and up to £500m the maximum loan is £25m. For loans under £30,000 there are automated processes aimed at speedy implementation.

CBILS facilities have the following features:

Interest free for 12 months (the government pays the interest directly to the Lender during this period)

Government provides the Lender with an 80% guarantee (although Borrowers remain responsible for 100% of the loan)

Lenders are not allowed to request Personal Guarantees (PG) for loans of up to £250,000

Over £250,000 Lenders may request PG but future recoveries cannot be for more than 20% of the outstanding balance, therefore building in some protection for Borrowers

Capital repayment holidays of up to 12 months

No arrangement fees (many Lenders not charging early repayment fees too)

Term loans can be up to six years and Overdrafts or Invoice Finance Facilities up to three years.

CBILS facilities are intended for businesses that have been impacted by the COVID-19 Pandemic. Businesses applying effectively self-certify that they have been affected.

CBILS facilities can cover losses resulting from enforced closure of businesses or their supply chain, additional capital spend to ramp up capacity to meet additional demand. In all cases businesses must show they were viable prior to the COVID-19 outbreak.

CBILS is now open to businesses where a lender considers there to be enough security, or where they would already be eligible to borrow on the bank’s commercial terms. Initially, lenders were seeking to use existing banking facilities where security was available, which means businesses will enjoy the CBILS features – no arrangement fees and 12 month interest free period.

The first port of call for businesses looking to use the scheme should be their existing banks, however most banks have stated they will only service existing clients. Therefore, if your bank is not willing to support there are other providers. Please contact your adviser or go to the BBB website for details of alternative Lenders


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