• Coronavirus Business Interruption Loan Scheme (CBILS)

    Originally published on Mon, 6th April 2020

    Further to the various government initiatives announced over the past few weeks the chancellor announced further measures at the end of last week regarding the Coronavirus Business Interruption Loan Scheme (CBILS). The latest developments whilst helpful in some respects, retain a clear  focus on the fact that the lenders will still consider their exposure to 20% of the debt ,and therefore any applications will have to be carefully planned and considered.

    The comprehensive summary below incorporates the updates sent to you on the 18th and 20th March 2020.

    To recap the CBILS scheme was initially announced on 17th March with the following key details:

    Loan funding for SME Business

    The headline policy for SME businesses was to create the Coronavirus Business Interruption Loan Scheme and underwrite £330 billion in loan guaranties, assisting businesses to access up to £5 million in Government-backed loan finance. The scheme was to be launched on 23rd March ( and was ) with the aim of providing liquidity to viable businesses that couldn’t and still cannot access finance because they have insufficient security to meet lender’s normal requirements. The loans were initially advertised as being interest free for 6 months.

    The scheme relied and continues to rely on the systems and decision making processes of the lenders. When we released our first guidance on this scheme it was unclear whether the qualifying criteria or the detail and volume of supporting information required would be relaxed to enable the quick decisions that businesses will and still do require.

    As the uncertainty grew for many businesses after the initial announcement of the CBIL scheme, the government confirmed on 23rd March that CBILS would be interest free for the first 12 months, instead of the initial 6 months that had previously been announced.

    A dedicated website with more specific and detailed information on the scheme was published on the same day which highlighted how CBILS would work. For simplicity and ease of reference we have summarised all the releases again and highlighted the eligibility criteria and how to apply below.

    Who is Eligible?

    Your business must:

    • Be UK-based in its business activity;
    • Have an annual turnover of no more than £45 million;
    • Have a borrowing proposal which the lender would consider viable, were it not for the current pandemic;
    • Self-certify that it has been adversely impacted by the coronavirus (COVID-19).

    Businesses from any sector can apply, except the following:

    • Banks, insurers and reinsurers (but not insurance brokers);
    • Public-sector bodies;
    • Further-education establishments, if they are grant-funded and state-funded primary and secondary schools.

    How it works

    A lender can provide up to £5 million in the form of:

    • Term loans
    • Overdrafts
    • Invoice finance
    • Asset finance

    CBILS gives the lender a government-backed guarantee for 80% of the loan repayments to encourage more lending. Please note the borrower remains fully liable for the debt it is only the lender that is covered for the 80%.

    The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied charges.

    Until the recent announcement any small business that could still access financial support on normal commercial terms from lenders were deemed ineligible for CBILS. In addition until the announcement many directors were also required by the lenders to provide personal guarantees on the loans in spite of them being 80% backed by the government. We should inform you that as a result of these stipulations and criteria as of 2nd April 2020 there have been over 130,000 inquiries for CBILS but only 983 companies have actually had loans approved for a total value of £90m of lending ! These facts were clearly a significant issue for the government and have resulted in the new initiatives albeit in our opinion the latest updated guidelines at the end of last week whilst addressing some issues still do not go far enough – please see below.

    Latest developments 

    At the end of last week the chancellor announced a range of measures to speed up the process of securing funding for businesses in need along with other statements intended to make the scheme more accessible and increase the essential required lending. CBILS has been expanded along with changes to the scheme’s features and eligibility criteria. The new provisions are as follows:

    • Access to the scheme has been opened up to those smaller businesses who would have previously met the lending requirements for a commercial facility and therefore not eligible for CBILS. Thankfully any viable business that can now demonstrate that they have been affected by coronavirus are now eligible for assistance from CBILS.
    • Insufficient security is no longer a condition to access the scheme, lenders have now been banned from requesting personal guarantees for loans under £250,000.
    • The government has also removed the requirement for businesses to demonstrate that they have no other means of accessing funding and that for all viable small businesses affected by coronavirus they will not have to offer any proof they have looked for funding elsewhere first.
    • In addition a  new scheme has been announced to bolster support for larger firms not currently eligible for loans. This is the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and is available for firms with a turnover between £45m - £500m and allows such businesses to get a maximum loan up to £25m.

    All of the above new guidelines are of help.

    Crucially however whilst the government continues to; provide cover to lenders for 80% of the loans, have specified that lenders CANNOT insist on personal guarantees for the loans less than £250k and clarified that access to the scheme does not preclude those businesses who meet the criteria for a commercial facility, THE FACT of matter still remains that the lenders are still exposed to 20% of the debt and there will therefore in our opinion be a reluctance to lend if the lenders do not feel that the business will be able to continue trading adequately enough to repay the debt. It is therefore imperative that any applications made under the scheme are carefully prepared before submission to stand the best chance of success. TO REPEAT it does not mean that loans will not be made just that care must be taken in the application.

    How to apply

    As we previously advised the government has instructed The British Business Bank (BBB) to operate CBILS via its accredited lenders. There are over 40 of these lenders currently working to provide finance, to recap again a list can be found of the accredited lenders here. Businesses have to apply directly with the accredited lenders which can be done through the website link. Please note most if not all of the major lenders are listed.

    What lenders will need from you 

    Details of the loan

    • The amount you would like to borrow
    • What the money is for — the lender will check that it’s going to be used for a suitable business purpose
    • The period over which you will make the repayments — the lender will assess whether the loan is affordable

    Supporting documents

    You will need to provide certain evidence to show that you can afford to repay the loan. This is likely to include:

    • Management accounts and historic statutory accounts
    • Cash flow forecast – we would suggest for one year in most cases
    • Business plan – we would suggest a simple summary of the plans for the next say 3 years in most cases
    • Details of assets

    Please find below a list of useful links regarding the scheme, as always if you have any queries regarding the measures above or any other government initiatives please don’t hesitate to get in contact to see how we can help.