A new temporary Coronavirus Business Interruption Loan Scheme (CBILS) is being launched this week to support small and medium-sized businesses in accessing bank lending and overdrafts. CBILS will be delivered through 40+ lenders accredited by the British Business Bank plc which is a state-owned bank established by the UK Government.

The names of the accredited lenders can be found on on the British Business Bank website and these lenders range from high-street banks, to challenger banks, asset-based lenders and smaller specialist local lenders.

If you are experiencing lost or deferred revenues, leading to disruptions to your cash-flow, you are eligible for the scheme if:

• your business is UK based, with a turnover of no more than £45 million per year (50% of which must be generated from trading activity). The scheme is open to sole traders, freelancers, companies, limited partnerships, limited liability partnerships or other legal entities as long as the business activity is operated through a business account.
• you have a borrowing proposal which, were it not for the current pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty,
• your business meets the other British Business Bank eligibility criteria (this is to be assessed by the lender on a case-by-case basis).

The following trades and organisations are not eligible to apply:

• banks, building societies, insurers and reinsurers (but not insurance brokers),
• the public sector, including state funded primary and secondary schools,
• employer, professional, religious or political membership organisations or trade unions.

You should talk to your bank or finance provider (not the British Business Bank) as soon as possible and discuss your business plan with them. If you have an existing loan with monthly repayments you may want to ask for a repayment holiday to help with cash flow. You may also consider approaching other lenders if your bank or finance provided is unable to provide the finance you need.

CBILS supports a wide range of business finance facilities, including:

• term loans,
• overdrafts,
• asset finance,
• invoice finance

(note: not every lender can provide every type of finance listed, therefore we advise you to check with your own lender).

Key features:

• Up to £5m facility: The maximum value of a facility provided under the scheme will be £5m, available on repayment terms of up to six years.
• 80% guarantee: The scheme provides the lender with a government-backed, partial guarantee (80%) against the outstanding facility balance, subject to an overall cap per lender.
• 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 (some lenders indicated that they would not charge arrangement fees or early repayment charges to SMEs borrowing under the scheme), so smaller businesses will benefit from no upfront costs and lower initial repayments (fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment).
• 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.
• Security: At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under. For amounts above £250,000, the lender will have to establish whether the borrower is able to offer any security (primary residential property cannot be taken as security under the scheme).
• The CBILS guarantee is to the lender and not the business and the borrower always remains 100% liable for the debt.

The scheme will initially run for six months but the Government has confirmed that the amount of funding available under the scheme will be demand-led. Therefore there may be no immediate need to approach a lender if you do not need finance in the short-term.

CBILS for Prospective Lenders

If you are a lender interested in seeking accreditation, please review the guidance documentation at British Business Bank and consider if you wish to then join the scheme.

If you have any questions on this article or anything related, please contact Aselle Djumabaeva-Wood.

Visit Hamlins’ COVID-19 Hub for more updates on issues affecting your business.