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17th April 2020

The Chancellor, Rishi SunakRishi Sunak

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.

What is the Coronavirus Business Interruption Loan Scheme (CBILS)?

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.

Eligibility for a CBILS

You’re eligible if your business:

  • is based in the UK
  • has an annual turnover of up to £45 million
  • has a borrowing proposal which the lender would consider viable, if not for the coronavirus pandemic
  • Businesses with a turnover over £45 million may be entitled to other government support.

Exceptions

The following businesses are not eligible to apply:

  • banks, insurers and reinsurers (but not insurance brokers)
  • public-sector bodies
  • further-education establishments, if they are grant-funded
  • state-funded primary and secondary schools

How does it work?

There are over 40 of these lenders currently working to provide finance. They include:

  • high-street banks
  • challenger banks
  • asset-based lenders
  • smaller specialist local lenders

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 the loan repayments to encourage more lending. The borrower remains fully liable for the debt.

KEY FEATURES OF THE SCHEME

Finance of up to £5 millionGuarantee to the lender to encourage them to lendGovernment pays interest and fees for 12 months
The maximum value of a facility provided under the scheme is £5 million, available on repayment terms of up to six years.

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.

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

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.

There are no guarantee fees for SMEs. Lenders pay a fee to access the scheme.
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For more information please visit www.gov.uk/guidance/apply-for-the-coronavirus-business-interruption-loan-scheme

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