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Almost three weeks after the chancellor, Rishi Sunak, first launched the scheme, just 1.4% of businesses that enquired about a coronavirus business interruption loan scheme (CBILS) have so far been successful. There is pressure on officials and leading banks to speed up the processing of loan applications.
Here below we set out some of the key features of the CBIL scheme.
The Coronavirus Business Interruption Loan Scheme (CBILS) supports small and medium-sized businesses, with an annual turnover of up to £45 million, to access loans, overdrafts, invoice finance and asset finance of up to £5 million for up to 6 years.
The government will also make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees. This means smaller businesses will benefit from no upfront costs and lower initial repayments.
The government will provide lenders with a guarantee of 80% on each loan (subject to pre-lender cap on claims) to give lenders further confidence in continuing to provide finance to small and medium-sized businesses.
You’re eligible if your business:
The following businesses are not eligible to apply:
There are over 40 of these lenders currently working to provide finance. They include:
A lender can provide up to £5 million in the form of:
CBILS gives the lender a government-backed guarantee for the loan repayments to encourage more lending. The borrower remains fully liable for the debt.
The scheme provides the lender with a government-backed, partial guarantee against the outstanding balance of the finance.
The borrower remains 100% liable for the debt.
For term loans and asset finance facilities: up to six years.
For overdrafts and invoice finance facilities: up to three years
Insufficient security is no longer a condition to access the scheme.
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.
No personal guarantees for facilities under £250,000.
Personal guarantees may still be required, at a lender’s discretion, for facilities above £250,000, but they exclude the Principal Private Residence (PPR) and 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.
For more information please visit www.gov.uk/guidance/apply-for-the-coronavirus-business-interruption-loan-scheme
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