Coronavirus Business Interruption Loan Scheme (CBILS)

The loan scheme implemented by the government to provide assistance to businesses whose activity has been curtailed by the Coronavirus is similar to the Enterprise Finance Guarantee announced in the Spring budget.

CBILS is run by the British Business Bank and provides government-backed loans with no interest payable by the borrower for twelve months. Furthermore, the government will cover arrangement or other fees charged by the lender in the first year.

The loans are intended to help smaller businesses which cannot access ‘normal’ financing due to a lack of security. To be eligible, turnover must not exceed £45 million and you have to operate within an eligible industrial sector. The majority of industries qualify, but a small number are excluded – essentially public sector businesses, religious bodies, insurers and banks.

The government is backing 80% of the balance to mitigate lender risk. This 80% guarantee is provided to the lender, not the business taking out the loan and the borrower remains 100% liable for the debt. If the lender feels that they can offer finance on normal commercial terms, they will do so, but where they feel there is insufficient security but an otherwise sound proposition, they can make an application through CBILS. At the lender’s discretion, they may be able to offer up to £250,000 in unsecured lending.

The duration of the loans ranges from three months to six years (capped at three years for overdrafts or invoice finance) and the funding available ranges from £1,000 to £5 million. Although provided by the British Business Bank, the loans are accessed through your normal banking channels. There are more than 40 accredited lenders and the British Business Bank have suggested applying through your bank’s website in the first instance due to high demand.

You will need to have a sound business proposal in place which (were it not for Coronavirus) would be viable for financing. The lenders should feel that the CBILS will allow the business to trade out of short to medium term difficulty.

You may need to put cash flow forecasts together or have recent management accounts to underpin your application. If you need any assistance in drawing up financial information for an application, please speak to Simpkins Edwards, as we have an expert team in place across our offices to support businesses through this incredibly challenging time.