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CBILS – The Coronavirus Business Interruption Loan Scheme

Update:

The treasury announced some significant changes to the CBILS programme on the evening of 2 April 2020:

- the requirement to have insufficient security / not be eligible for a commercial loan has been lifted; and
- Personal Guarantees can now only be enforced up to a maximum of 20% of the outstanding balance after business assets have been realised. 

In addition a new scheme very similar to CBIL but for businesses turning over £45m - £500m was announced, the Coronavirus Large Business Interruption Loan Scheme (CLBILS). The full details of this are to be announced later this month and we will provide an update once more details are available

What is it?

CBILS is the government scheme under which interest free loans of up to £5m are being made available to SMEs negatively impacted by COVID-19.

The loans are 80% guaranteed by the government via the British Business Bank, but are actually issued via participating lenders. There are over 40 lenders participating in the scheme, including all of the major high street lenders and a number of challenger banks and alternative lenders.

The government will cover the cost of the first 12 months of interest and any fees.

Who is eligible?

 In order to apply you must:

  • be a UK-based business, with annual turnover of no more than £45m; and
  • have a borrowing proposal which, were it not for the current 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.

What’s the catch?

There are unfortunately a few reasons why CBILS may not be particularly helpful in practice.

  • Personal guarantees – lenders are almost always requiring personal guarantees from directors / shareholders for the full amount of the borrowing;
  • It won’t help failing businesses – to be eligible for CBILS you have to evidence that you were in a sound position prior to the pandemic. We are hearing of very high decline levels at lenders as a large number of businesses which were already failing have applied and been turned down; and
  • It won’t hep successful businesses – conversely, if you are still in good enough financial health to be eligible for borrowing on standard commercial terms and / or if you have assets you could secure to the bank, you will be ineligible for CBILS and will instead be offered a loan on commercial terms by the lender.

How do I apply?

If you think you will be eligible the easiest route to apply is via your existing contact at your lender, assuming that they are part of the scheme. You can check which lenders are part of the scheme here, and if your current lenders are not part of the scheme then you will need to contact a lender who is.

If you have any queries in relation to any of the above or any other queries around financing your company at this time, please contact Ed Hobbs or visit the Coronavirus/ COVID-19 area on our website.

 

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