Covid-19 coronavirus update: HM Treasury Coronavirus Business Interruption Loan Scheme (CBILS)

Key Information

• The purpose is to encourage more lending to provide financial support to SMEs that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak.
• CBILS is only available for businesses with a maximum turnover of £45m.  For larger businesses, a further scheme (CLBILS) will be available shortly.
• The maximum financing is £5m per SME, with a maximum term of 6 years.
• A business remains fully liable to repay the loan – the guarantee is for the protection of the lender.
• However, the Government will pay the first 12 months of interest charges and any arrangement fees.

What is CBILS?

The CBILS is one of two major support measures announced by HM Treasury.  The other is the Covid Corporate Financing Facility operated by the Bank of England (see our separate bulletin).

The CBILS is operated by British Business Bank and launched on 23 March 2020.  Under the scheme a lender can provide up to £5m (originally set at £1.2m) of financing with a government-backed partial guarantee for the loan repayments. 

It is the lenders who will determine if you are eligible for CBILS.  The starting point for CBILS 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 CBILS government guarantee.

There are more than 40 accredited lenders in the UK who can access CBILS guarantees, including high street banks, challenger banks and asset-based lenders.

As of 3 April, more than £90m of loans to nearly 1,000 SMEs had been approved under CBILS.

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 CBILS?

The CBILS 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 of no more than £45 million
• Generate more than 50% of turnover from trading activity
• Have a borrowing proposal which the lender would consider viable, were it not for the current pandemic
• Use the financing primarily to support trading in the UK
• Self-certify that it has been adversely impacted by COVID-19.

An additional condition (that the business would not be eligible for a normal commercial facility from the lender or would be unable to provide adequate security for such a facility) has now been dropped for all applications.

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

What is CLBILS?

On 3 April, 2020 the Chancellor announced that the CBILS scheme would be extended to allow larger companies to access government-guaranteed funding.  This new scheme (Coronavirus Large Business Interruption Loan Scheme or CLBILS) will be available for businesses with a turnover of £45m to £500m and will guarantee loans of up to £25m.  As with CBILS, the government guarantee will extend to 80% of the repayments.  CLBILS is not in operation at the time of this bulletin.

Will I need to give a personal guarantee or security?

Banks have been prohibited from demanding personal guarantees for loans under CBILS of £250k or less.  For loans under CBILS or 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.

A bank is not permitted to take security over a principal private residence as security for a loan (or guarantee) under CBILS.

What support does the government provide?

The government guarantee extends to 80% of the amount 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.

The government also pays the first 12 months of interest, and any arrangement fees charged by the lender.  This is referred to as a "Business Interruption Payment".

What financing terms are available?

The maximum maturity for a CBILS-backed borrowing is 6 years.

The financing can take the form of a term loan, overdraft, invoice financing or asset financing.

No fees are payable by SMEs to access the scheme.

Excluded entities 

The following categories of entities are excluded from accessing CBILS:

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