Coronavirus Business Interruption Loan Scheme (CBILS)

The Chancellor Rishi Sunak (Friday 3 April) announced that the government are taking further action to support firms affected by the coronavirus crisis by bolstering business interruption loans for small businesses and announcing a new scheme for larger companies.

Original Scheme: Coronavirus Business Interruption Loan Scheme (CBLIS):

What Is it?

This is a temporary loan scheme for small and medium sized businesses. As a business you will be able to access a 12-month interest free loan. The temporary Coronavirus Business Interruption Loan Scheme will support SMEs with access to loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to 6 years. Delivered by the British Business Bank, will enable businesses to apply for a loan of up to £5 million, with the government covering up to 80% of any losses with no fees. Businesses can access the first 12 months of that finance interest free, as government will cover the first 12 months of interest payments via a Business Interruption Payment. Businesses must have turnover of less than £45 million and meet British Business Bank eligibility criteria.

How do I access it?

The scheme is now open for applications. All major banks are offering this scheme. To apply use the link in the cell to the right. You can talk to your bank or one of the 40 accredited finance provider s(not the British Business Bank itself) as soon as possible to discuss your business plan. If the business has an existing loan with monthly repayments they may want to ask for a repayment holiday to help with cash flow. Click here to find out more.

New changes announced on Friday 3rd March 2020

The expanded scheme will be operational with lenders from Monday 6th April 2020.

The emergency loans scheme for businesses struggling to survive amid the coronavirus pandemic has been revamped following strong criticism. The changes have been made to make it easier for firms to access loans. The changes to the business interruption loan scheme will hopefully mean that more businesses are able to access financial support during the lockdown.

Problems with original scheme:

  • The Treasury said it had received more than 130,000 loan enquires from firms but fewer than 1,000 had been approved.
  • Banks have been criticised for their loan tactics.
  • Government-backed loans for small businesses were only available to firms that had been turned down for a commercial loan from their bank. That saw businesses being asked to pay interest rates of as much as 30%.

New changes:

  • Applications will not be limited to businesses that have been refused a loan on commercial terms. However, the Treasury did not put in place restrictions on the interest rates that banks can charge for loans.
  • Larger firms with a turnover of up to £500m will also be eligible for more help. The revamped scheme will offer government-backed loans of up to £25m to firms with revenues of between £45m and £500m.
  • Banks will also be banned from asking company owners to guarantee loans with their own savings or property when borrowing up to £250,000. 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.
  • More businesses should now be eligible to get loans

Problems which still exist:

  • They are still loans and not Companies wishing to take them out will be 100% liable for the debt and the government has not capped the interest rate banks can charge even though banks are able to borrow at close to 0%.

Summary of scheme extension and new scheme (CLBILS)
The Government has taken further action to support firms affected by the coronavirus crisis by bolstering business interruption loans for small businesses and announcing a new scheme for larger companies.

  1. Extended: Coronavirus Business Interruption Loan Scheme (CBILS)
    The Government has extended the CBILS so that all viable small businesses affected by COVID-19, and not just those unable to secure regular commercial financing, will now be eligible should they need finance to keep operating during this difficult time.

    The government is also stopping lenders from requesting personal guarantees for loans under £250,000 and making operational changes to speed up lending approvals. The government will continue to cover the first twelve months of interest and fees.

    Please find further details here

  2. New: Coronavirus Large Business Interruption Loan Scheme (CLBILS)
    The new CLBILS will ensure that more firms are able to benefit from government-backed support during this difficult time. It will provide a government guarantee of 80% to enable banks to make loans of up to £25 million to firms with an annual turnover of between £45 million and £500 million.

Loans backed by a guarantee under CLBILS will be offered at commercial rates of interest and further details of the scheme will be announced later this month.

Please find initial details here