Changes made to Coronavirus Business Interruption Loan Scheme to benefit more businesses

CBILS
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The Coronavirus Business Interruption Loan Scheme (CBILS) has now been expanded along with changes to the scheme’s features and eligibility criteria. The changes should allow more smaller businesses across the UK impacted by the Coronavirus crisis to access funding.

Access to the scheme has been opened up to those smaller businesses who 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.

The Coronavirus Business Interruption Loan Scheme, delivered through 40+ British Business Bank accredited lenders, is designed to support the continued provision of finance to UK 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.

These changes are to 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 the 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.

Mike Cherry, National Chair, FSB (Federation of Small Businesses) said: “The most immediate issue threatening the survival of millions of small businesses and the self- employed is severely depleted cash flow. Time is of the essence and therefore we welcome government action in ensuring that any viable small business that has been negatively impacted by the Coronavirus can now directly access CBILS rather first being offered a bank’s own standard commercial lending product.

“Removing personal guarantees for all commercial loans below £250K is also very welcome. Taking on debt at the current time is a daunting prospect for many small businesses and the self-employed. We look forward to continuing our constructive engagement with government to ensure that debt can be repaid in an affordable way that allows small businesses to recover from this crisis and to thrive again.”