Wayne Harrison of KSA Group explains how the newly launched Coronavirus Business Interruption Loan Scheme (CBILS) can help businesses during the COVID-19 lockdown. 

What is the Coronavirus Business Interruption Loan Scheme (CBILS)?

To support small to medium sized businesses (SMEs) through this disruptive period due to the outbreak of coronavirus (COVID-19), the government has announced and implemented a new scheme called the Coronavirus Business Interruption Loan Scheme (CBILS).

The CBILS offers loans of up to £5 million for SMEs who are experiencing cash flow issues due to the coronavirus pandemic. The loans are provided by numerous lenders and will be repayable over a period of 6 years. The loans cover:

• overdrafts
• term loans
• invoice finance
• asset finance

The CBILS provides lenders with an 80 per cent, government-backed guarantee on each loan to give greater confidence in continuing to provide finance to SMEs. It should be noted, however, that the CBILS guarantee is to the lender and not the business.

The government will also make a Business Interruption Payment to cover the first 12 months of any interest payments and any lender-levied fees. This protects small businesses from any upfront costs and lower initial repayments.

Who is eligible under the Coronavirus Business Interruption Loan Scheme (CBILS)?

SMEs can access the scheme with a no guarantee fee, for the full amount offered, so long as the following criteria is matched:

• the business is UK based in its activity
• turnover of the business is no more than £45 million per year
• the business has a borrowing proposal which, excluding the current pandemic, would be considered viable by the lender
• the lender believes the provision of finance will enable the business to recover from any short to medium term difficulty

The British Business Bank eligibility criteria must also be met. The criteria states that businesses must:

• generate more than 50% of its turnover from trading activity
• wish to borrow up to £5 million
• apply for business purposes only
• use the loan to support primarily trading in the UK

Businesses from any sector can apply, except the following:

• banks, insurers and reinsurers (but not insurance brokers)
• public-sector bodies
• further-education establishments, if they are grant-funded
• state-funded primary and secondary schools

How can businesses access the Coronavirus Business Interruption Loan Scheme (CBILS)?

There are 40+ accredited lenders participating in and able to offer the CBILS, all major banks included. They decide on each business’ eligibility in the scheme. Lenders are accredited and backed by the government-owned, British Business Bank and you can see the full list of accredited lenders here. Be aware that not every lender can provide every type of finance listed.

To access the scheme, it is advised that businesses to talk to their own provider first. Alternative providers should be considered if the finance required is unable to be accessed, however it’s important to note that the business will be treated as a new customer and this may delay the process.

It is recommended that businesses applying for the scheme contact lenders through their website rather than branches, which may be shut due to social distancing, and call centres, which are expected to be very busy. 

What is the Coronavirus Large Business Interruption Loan Scheme?

Following some revised changes to the original CBILS scheme, the Coronavirus Large Business Interruption Loan Scheme was announced and will launch later this month.

This scheme is like the CBILS but for larger businesses with revenues of between £45 million and £500 million. The facility provides a government guarantee of up to 80 per cent, enabling banks to give loans of up to £25 million. Facilities under this scheme will be offered at commercial rates of interest, through commercial lenders.

About the author

Wayne Harrison is a Licensed Insolvency Practitioner who has over 25 year's insolvency experience helping companies in all sectors. Wayne is the director in charge of the London Office of KSA Group.

See also

Government to amend insolvency law to keep businesses trading

What does it mean to be furloughed?

What does the COVID-19 'lockdown' mean for UK employers?

Find out more

COVID-19: guidance for employees (GOV.uk)

Coronavirus Business Interruption Loan Scheme (British Business Bank)

CBILS current accredited lenders and partners (British Business Bank)

Image: Getty Images

Publication date: 14 April 2020

Any opinion expressed in this article is that of the author and the author alone, and does not necessarily represent that of The Gazette.