COVID-19: Business Interruption Loan Scheme

On Wednesday 17 March 2020, the UK Government announced a commitment to make £330bn of funding available to businesses to assist them to navigate economic disruption associated with the Covid-19 pandemic. The scheme, known as the ‘Coronavirus Business Interruption Loan Scheme’ (“CBILS”), will be delivered by the British Business Bank, launching formally in the week commencing 23 March 2020, and will support SMEs to access loans up to £5 million.

CBILS will temporarily replace the Enterprise Finance Guarantee (“EFG”), and will seek to facilitate access finance to SMEs that are viable, but unable to obtain finance elsewhere as they have insufficient security to meet a lender’s normal requirements. CBILS will provide the lender with a Government-backed guarantee against 80% of the outstanding facility balance, potentially transforming a declined credit application to an approval.

Businesses are expected to be able to access loans of up to £5 million, with an interest free period for 6 months’ and covered by the Government. Term loans are expected to be available from three months to ten years, and up to three years for revolving facilities and invoice finance.

Whilst the wider market for debt remains buoyant with plenty of ‘traditional’ funding options available, the CBILS scheme is a valuable first step to ensuring the nation’s SMEs which have strong underlying fundamentals but a lack security, have access to short-term finance to ensure their survival. It remains to be seen whether the CBILS scheme will be expanded enable larger businesses to benefit from Government support where there is certainly a likely to be a need.

When launched, CBILS will cover the following business finance products:

  • Term facilities
  • Overdrafts
  • Invoice finance facilities
  • Asset finance facilities

To be eligible for CBILS, SMEs must meet the following criteria:

  • UK-based
  • Turnover less than £41 million per annum
  • Operate within an eligible sector (almost all business sectors are eligible, however there are a small number of restricted sectors arising primarily from EU de minimis-State aid rules)
  • Have a sound borrowing proposal, but insufficient security to meet a lender’s normal requirements
  • Be able to confirm that they have not received deminimis State aid beyond €200,000 equivalent over the current and previous two fiscal years

Further information is available via the British Business Bank website.

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Covid-19: Business Interruption Loan Scheme