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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.

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