Launched on 23 March, today the Coronavirus Business Interruption Loan Scheme (CBILS) has been significantly expanded along with changes to the scheme’s features and eligibility criteria.
The changes mean even more smaller businesses across the UK impacted by the Coronavirus crisis can access funding.
Importantly, 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 creating more choice and diversity of supply for smaller businesses.
About 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 smaller businesses (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 should 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, comments: “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.
Dame Carolyn Fairbairn, CBI Director-General, said:“The Chancellor’s measures are a big step forward. They will help deliver cash faster to firms battling for survival in the headwinds of the pandemic.
“By providing more support for mid-tier companies, they are backing our most significant and iconic regional employers. These firms number in the thousands and make a huge contribution to the economy, so it’s good to see them getting the support they deserve. More detail and a clear time frame are still needed, but this plan is hugely welcome.
“Reforms to the CIBL scheme for firms up to £45 million will simplify the process and make it easier for loans to reach smaller businesses struggling for cash. Alongside, banks are working at breakneck speed to deliver loans to firms most in need.
“Each week brings unprecedented levels of economic support and it’s encouraging to see the Government stepping in where urgent help is needed. This will need to continue as the challenges of this health and economic crisis unfold.”
Federation of Small Businesses (FSB) National Chairman Mike Cherry said: “Time and again we’ve heard from members who’ve approached their bank seeking an emergency loan, only to be offered anything but. Many small businesses have just had to pay monthly wages and national insurance bills. They also have many other outgoings that they need to pay, today.
“They were promised interest-free, fee-free, government-backed support from banks but, so far, the process for securing it has proved nightmarish for many.
“Removing the need to be offered standard products first – with an interruption loan as an afterthought – would mark a big step forward. So too would be ensuring small businesses can qualify for an emergency loan application on the basis of one simple criterion: whether or not you’ve been negatively impacted by the spread of coronavirus is the only question that counts at this juncture.
“We also hope to see the need for personal guarantees ruled out where smaller loans are concerned. These are business loans being sought at an incredibly difficult time – borrowing should be against business, not personal, assets. Loans to the smallest businesses should be pushed out of the door and into bank accounts, now.
“Banks should also be pushed to exercise restraint when it comes to setting the rates that will apply on these loans once the initial twelve months is up. No one should be profiteering from these loans which are not standard commercial transactions, but survival mechanisms.
“There are still some questions that need to be answered by the banks here, not least around how many interruption loans have been sought and how many of these enquiries have translated into meaningful support. We would like to see weekly updates on these numbers. We’re all in this struggle together. Transparency and accountability are key.
“Taking on more debt is a daunting prospect for many smaller businesses in this climate – so we are keen to continue our constructive engagement with government around how debt can be repaid in a sustainable way.”