close
Share with your friends

Last updated 27 May 2020

The Chancellor has announced various changes to the Coronavirus Business Interruption Loan Scheme (CBILS) for businesses up to £45 million turnover designed to increase availability and speed of funding to UK Small and mid-size enterprises (SMEs).

What is it?

  • Loans delivered by accredited lenders to UK SMEs, backed by guarantees from the British Business Bank of up to 80 percent of the loan.
  • Loans, overdrafts, invoice finance & asset finance of up to £5 million for up to six years. 
  • Eligibility: 
    • Businesses of up to £45 million turnover
    • UK-based business which would have been viable pre COVID-19
       

Key changes to CBILS

  • Now extended to all viable small business affected by COVID-19, and not just those unable to secure regular commercial financing. 
  • Do lenders need to consider a “normal” loan before accessing CBILS? This requirement has been dropped. Lenders can proceed straight to a CBILS-backed loan. 
  • Do I need to provide security and Personal Guarantees (“PGs”)?
    • Loans <£250k: PGs no longer required
    • Loans >£250k: PGs may still be required but limited to 20% of outstanding loan after recoveries from business and other security
    • Security (to the extent available) may remain a lender requirement for some borrowers
  • Will I pay interest? 12 months interest free period (also free of fees) still applicable.

Our view

Will this unlock and/or accelerate access to financing?
  • Greater flexibility for banks to apply scheme: Removal of the requirement to exhaust other funding options prior to accessing CBILS should provide greater flexibility for lenders to assess and apply the scheme up front. 
  • Structures: We expect lenders to continue to standardise products offered to customers to support faster implementation. 
  • Timing: Should support further streamlining of credit processes / decision making, noting the continued challenge presented by the volume of requests being made.
    • An automated process is also being introduced for loans up to £30k to increase speed and free up banking capacity for larger CBILS loans. 
  • Pricing: Lenders being asked to take into account government support when evaluating pricing.

What practical steps should companies take to access the Scheme?

  • Companies should still approach lenders to access incremental funding needs.
    • Lenders will determine whether / how to apply the Scheme 
  • A well-structured funding request will be central to the success / speed of outcome, demonstrating: 
    • Financial viability of the business pre-COVID-19 (pre-1 March 2020). 
    • Robust plan and actions to manage through COVID-19 interruptions / impacts. 
    • Deliverable path to restoring financial strength and repay loans post COVID-19 crisis. 
    • Backed by well-grounded cashflow projections and scenarios. 
  • Acting fast remains paramount to meet required funding timescales given the volume of requests being managed by lenders.

Official information from Government is available on their website here.

Get in touch