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James McNeil | 2nd October 2020

Coronavirus Large Business Interruption Loan Scheme


James McNeil | 2nd October 2020

Coronavirus Large Business Interruption Loan Scheme

Following changes announced on 19 May by HM Treasury several changes will take effect from 26 May. The maximum amount available through the scheme to borrowers and its group has been increased from £50m to £200m.

Both term loans and revolving credit facilities over £50m will be offered by CLBILS lenders which have secured additional accreditation.

The maximum size for invoice finance and asset finance facilities remains at £50m*

Companies who borrow more than £50m through the scheme will be subject to restrictions on dividend payments, senior pay and share buy-backs during the loan period. Additional information, including the provisions announced today can be found on the British Business Bank FAQ page.

*Borrowers may be able to access additional facilities from separate accredited lenders provided they do not in aggregate exceed the maximum applicable to that borrower.

The Chancellor of the Exchequer originally announced details of the Coronavirus Large Business Interruption Loan Scheme (CLBILS) back in April. The scheme was made available from Monday 20 April. CLBILS will be delivered by lenders accredited by the British Business Bank, the new scheme provides finance to mid-sized and larger UK businesses with turnover above £45m (which dovetails with the upper limit for the existing smaller-business focused CBILS, see our blog “The Coronavirus Business Interruption Loan Scheme“).

Please note that as of 24 September 2020, the Chancellor of the Exchequer announced the CLBILS will be extended until 30 November 2020.

How the Coronavirus Large Business Interruption Loan Scheme will work

The new Coronavirus Large Business Interruption Loan Scheme will support term loans, revolving credit facilities (including overdrafts), invoice finance and asset finance facilities. The government will be providing a partial guarantee of 80% of the outstanding facility balance.

Key terms

  • Up to £50m for those with a turnover of over £250m, and of up to £25m for businesses with turnover from £45m up to £250m;
  • Finance terms are from three months to three years;
  • No personal guarantees are permitted for facilities under £250,000. For facilities of £250,000 and over, claims on personal guarantees cannot exceed 20% of losses after all other recoveries have been applied;
  • The borrower always remains 100% liable for the debt;
  • UK businesses from all sectors (other than credit institutions (falling within the remit of the Bank Recovery and Resolution Directive), building societies, insurers and reinsurers (but not insurance brokers), public-sector bodies, further-education establishments, if they are grant-funded, state-funded primary and secondary schools) can apply for a facility;
  • Self-certify that it has been adversely impacted by the Coronavirus (COVID-19);
  • Borrowers must have a borrowing proposal which, were it not for the current pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty and
  • The business cannot have borrowed under the Bank of England’s Covid Corporate Financing Facility.

As from 25 September 2020 businesses applying for CLBILS will benefit from more flexibility on the date the test of whether or not their business is an ‘undertaking in difficulty’ is assessed.
To be eligible for these schemes, businesses previously had to demonstrate that they were not an ‘undertaking in difficulty’ – a requirement under EU State aid law – as of 31 December 2019.

The definition of ‘undertaking in difficulty’ includes businesses that:

  • had accumulated losses greater than half of their subscribed share capital (for limited liability companies) or capital (for unlimited liability companies)
  • had entered into collective insolvency proceedings or fulfilled the criteria to be put into collective insolvency proceedings
  • had previously received rescue aid that was yet to be reimbursed or (in the case of a guarantee, terminated)
  • had received restructuring aid and were still under a restructuring plan
  • had (where the undertaking is not an SME) fallen below the required solvency ratios (see further below) for the previous two years.

The new guidance allows for the ‘undertaking in difficulty’ assessment to be determined at the date of application for the schemes. Businesses that were ‘undertakings in difficulty’ on 31 December 2019 but are no longer ‘undertakings in difficulty’ will now be (in principle) eligible for the schemes.

This flexibility means that businesses can take action to convert their debt (for example, in the form of loan notes) to shares (equity) in order to qualify for the schemes, giving them the option to restructure their finances before application so they may become eligible.

The Scheme is a part of a government wide package support for UK businesses and employees. For more information visit the Business Support website.

If you have any questions relating to this new Scheme or indeed any other business finance related questions please contact James McNeil, Head of the Banking and Finance team.

We have a dedicated page, Coronavirus (COVID-19) – Legal advice and guidance, which we are continually updating with information as and when new measures come through from the government and other bodies.

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