Covid–19 coronavirus update: HM Treasury Coronavirus Large Business Interruption Loan Scheme (CLBILS) Speed Read- updated 19 May 2020

Key information

CLBILS is a scheme under which the UK Government will provide a partial guarantee of financing made available to mid-cap and larger businesses. 

The purpose is to encourage more lending to provide financial support to UK based businesses that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak.

CLBILS is only available for businesses with a turnover exceeding £45m and which are not utilising the CCFF.   

A business remains fully liable to repay the loan – the guarantee is for the protection of the lender. The maximum financing which can be covered by the guarantee is £50m (increased to £200m from 26 May) (if turnover >£250m) or £25m (if turnover ≤£250m), with a maximum term of 3 years. 

For each application the loan amount is capped at higher of 2x annual wage bill and 25% of total turnover, with the possibility of an increase to 12 month's liquidity needs.

Unlike CBILS (a) the Government will not pay the first 12 months of interest charges and any arrangement fees; but (b) the CLBILS guarantee will cover interest and fees, as well as principal.

What is CLBILS?

The CLBILS is one of three major support measures announced by HM Treasury.  The others are the Coronavirus Business Interruption Loan Scheme (CBILS, see below) and the Covid Corporate Financing Facility (CCFF) operated by the Bank of England (see our separate bulletin).

Note that a company cannot access the CLBILS if it is also utilising the CCFF.

The CLBILS is operated by British Business Bank (BBB) and available from 20 April 2020.  Under the scheme a lender can provide up to £50m (increased to £200m from 26 May) of financing with a government-backed partial guarantee for the loan repayments, interest and fees. 

It is the lenders who will determine if you are eligible for CLBILS.  The starting point for CLBILS is therefore a discussion with a lender to see if the lender is willing to make financing available to you on the basis of a CLBILS government guarantee. 

There are currently 10 accredited lenders in the UK who can access CBILS guarantees: Bank of Scotland, Barclays, Clydesdale Bank, Danske Bank, HSBC, Lloyds Bank, NatWest, Santander, RBS and Ulster Bank.

It is important to remember that you remain liable to repay the loan – the guarantee is for the protection of the lender, not the borrower

Who can access CLBILS?

The CLBILS is not available to all businesses.  There are a number of criteria to be satisfied.  The borrower must:

• Be UK-based in its business activity
• Have an annual consolidated turnover exceeding £45 million
• Not have accessed the Bank of England Covid Corporate Financing Facility
• Not be "an undertaking in difficulty" under EU state aid rules as at 31 December 2019
• Have a borrowing proposal which:

(a)   the lender would consider viable, were it not for the current pandemic;

(b)   the lender believes will enable the business to trade out of any short- to medium-term difficulty; and

(c)   if granted, would mean that the borrower is not expected to go out of business in the short-to-medium term,

the "Borrower Viability Test".

• Self-certify that it has been adversely impacted by COVID-19.

Do remember to check any limitations on the incurrence of financial indebtedness in your existing facilities.

How much can I borrow?

The maximum amount is £25m for borrowers with a group turnover of up to £250m or £50m (increased to £200m from 26 May) for borrowers with a group turnover of more than £250m.

The amount borrowed must normally not exceed (i) 2 x the borrower’s annual wage bill for the most recent year available, or (ii) 25% of the borrower’s total turnover in 2019.  With appropriate justification and based on self-certification of the borrower, the amount may be increased to cover the borrower's liquidity needs for the next 12 months.

Companies borrowing more than £50 million through CLBILS will be subject to restrictions on dividend payments, senior pay and share buy-backs during the period of the loan, including a ban on dividend payments and cash bonuses/pay rises for senior management (except where they were previously agreed, in keeping with similar payments made in the preceding 12 months and do not have a material negative impact on the borrower's ability to repay the loan).

What is CBILS?

The Coronavirus Business Interruption Loan Scheme was launched on 23 March 2020 allowing for government-backed partial guarantees for repayments on loans of up to £5m to UK-based businesses with a turnover of up to  £45m.  The government guarantee under CBILS extends to 80% of the repayments, excluding interest and fees.  CBILS is targeted at SMEs, whereas CLBILS is available for larger companies.

Will I need to give a personal guarantee or security?

Banks have been prohibited from demanding personal guarantees for loans under CLBILS of £250k or less.  For loans under CLBILS of more than £250k, a bank cannot require a personal guarantee for more than 20% of the balance outstanding after all business assets have been applied.

Loans under CLBILS must benefit from collateral taken by any lender on at least a pari passu basis with the most senior obligation of the borrower (subject to limited exceptions). 

What support does the government provide?

The government guarantee extends to 80% of the amount (including interest and fees) owing under each loan.  A lender is required to follow its standard commercial recovery procedures (including realising any guarantees and security) before it can claim under ther guarantee.

Unlike CBILS, the "Business Interruption Payment" (under which the government also pays the first 12 months of interest and any arrangement fees charged by the lender), does not apply.  However, CLBILS guarantees cover interest and fees (whereas CBILS guarantees do not).

The economic benefit of the guarantee must be passed on by the lender to the borrower by way of a proportionate reduction in pricing.

What financing terms are available?

The maximum maturity for a CLBILS-backed borrowing is 3 years.

The financing can take the form of a term loan, revolving credit facility, invoice financing or asset financing.

Lenders will be charged a fee to access the scheme.

Excluded entities

The following categories of entities are excluded from accessing CLBILS:

• Credit institutions, building societies, insurers and reinsurers (but not insurance brokers);
• Public-sector bodies;
• Further education establishments, if grant-funded; and
• State-funded primary and secondary schools.