COVID-19 EXPERT LEGAL INSIGHTS

Coronavirus Business Interruption Loan Scheme (CBILS) FAQs

The following FAQs set out the key questions that you may have about the Coronavirus Business Interruption Loan Scheme (CBILS).

What is a CBILS Loan?

The Coronavirus Business Interruption Loan Scheme (“CBILS”) was launched in March by the Government together with the British Business Bank to provide finance of up to £5m to small and medium sized businesses (“SMEs”) that have suffered cash flow issues as a result of the Coronavirus pandemic.  Loans, overdrafts, invoice finance and asset finance are all available as part of the scheme through over 40 accredited lenders. These lenders include high street banks such as Barclays, HSBC UK and Lloyds Bank but also challenger banks and smaller lenders. The full list of accredited lenders can be viewed through the British Business Bank website.

Importantly, the government will provide an 80% guarantee the lender for the outstanding balance owed by the borrower. It will also cover all interest payments and any applicable lender’s fees during the first 12 months of the finance being in place.

The repayment terms for a CBILS Loan will vary depending on what has been agreed with the lender but the finance can be in place for a maximum of six years in respect of term loans and asset finance facilities, and for three years for invoice finance and overdrafts.

 

Can I apply for a CBILS Loan?

To be eligible to apply for finance under the CBILS, your business must meet the following criteria:

  • it must be based in the UK;
  • have an annual turnover of no more than £45m; and
  • it must be able to present a borrowing proposal which the lender would consider “viable”, were it not for the coronavirus pandemic.

You will also need to show that your business has been adversely affected by the Coronavirus pandemic.

 

How much interest will be charged after the initial 12 month period?

This will vary between lenders and will be agreed with the lender at the outset on the basis of the borrower’s borrowing proposal.  

 

What will happen if the loan cannot be repaid?

The lender may be able to enforce its security to recover the amounts outstanding. The nature of the security given will be agreed between the lender and the borrower at the outset but if the loan is less than £250,000 then the lender will not be permitted to ask for a personal guarantee.

For CBILS Loans which are greater than £250,000, the lender may ask for a personal guarantee to be given but the amount recoverable under it will be limited to a maximum of 20% of the outstanding balance, and the lender must apply the proceeds of the business assets first.

In no circumstances can a borrower’s/guarantor’s principal private residence be given as security for a CBILS Loan. 

The government will cover 80% of the outstanding amount after the business assets have been realised and any personal guarantee has been called upon. The lender will lose the remaining 20%.

 

Are there any other finance options available during the Coronavirus pandemic if a CBILS Loan is not right for my business?

If a CBILS Loan is not right for your business, there are other financial options available to assist those businesses experiencing cash flow issues as a result of the Coronavirus pandemic:

Bounce Back Loans

The Bounce Back Loan Scheme was also introduced by the Government to assist SMEs struggling as a result of the Coronavirus pandemic, with smaller scale loans of between £2,000 and up to 25% of the business’ turnover (up to a maximum of £50,000). These loans are 100% guaranteed by the Government and one of the key differences between the CBILS and the Bounce Back Loan Scheme is that there is no forward looking ‘viability’ test to meet (see question 2 above). You can read more about the Bounce Back Loan Scheme in our blog Bounce Back Loan Scheme: Is it a bounce back from CBILS?.

Coronavirus Large Business Interruption Loan Scheme (“CLBILS”)

The CLBILS can provide finance to medium and large sized businesses with a turnover of over £45m that have suffered cashflow issues due to the Coronavirus pandemic.  The CLBILS can offer eligible businesses term loans and revolving credit facilities of up to £200m and asset finance and invoice finance of up to £50m for up to three years. 

The Future Fund

The Future Fund Scheme allows innovative UK businesses which are struggling as a result of the Coronavirus pandemic to apply for a convertible loan from the Government of between £125,000 and £5m. Certain eligibility criteria must be met in order to be able to apply to the Future Fund, including that the business must have raised at least £250,000 in equity investment from third party investors in the last 5 years, and the convertible loan from the Government must be at least matched by private investors.  

Covid Corporate Financing Facility (“CCFF”)

The CCFF is a joint HM Treasury and Bank of England finance facility available to (non-financial) investment graded large UK business which make a material contribution to the UK and which have been disrupted as a result of the Coronavirus pandemic.

 

When will the CBILS end?

At present, the British Business Bank is advising that the CBILS will run for 6 months.

 

If you would like any further information or advice about the issues above, please contact any member of our banking and finance team.

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