In response to concerns raised by the business community since the Coronavirus Business Interruption Loan Scheme was launched, the Chancellor has extended the scheme so that all viable small businesses affected by COVID-19, and not just those unable to secure regular commercial financing, will now be eligible. Insufficient security is no longer a condition to access the scheme.

Please note that as of 24 September 2020, the Chancellor of the Exchequer announced the Coronavirus Business Interruption Loan Scheme (CBILS) will be extended until 30 November 2020.

The Chancellor is hoping that by doing this he will significantly increase the number of businesses eligible for the scheme. The expanded scheme will be operational with lenders from Monday 6 April 2020. Importantly, the government has indicated that these changes should be retrospectively applied by lenders for any CBILS facilities offered since 23 March 2020. For any commercial (non-CBILS) facilities offered since the same date, providing the borrower meets the CBILS eligibility, lenders have been asked to bring these facilities onto CBILS wherever possible.

What is CBILS?

CBILS is a new government backed scheme which can provide facilities of up to £5m for smaller businesses across the UK who are experiencing trading difficulties due to the current Coronavirus pandemic. CBILS provides the lender with a government-backed guarantee to assist lenders in making loans to businesses where previously they may have refused to do so.

Please note that the borrower still remains 100% liable for the debt.

CBILS is available through the British Business Bank’s 100+ accredited lenders which are listed on the British Business Bank website. They include:

CBILS can be used to support a wide range of business finance facilities, including:

but please note that not every lender will be able to offer each type of finance.

What are the key terms of CBILS

The key terms of CBILS are:

Please note that if the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.

Is my business eligible for CBILS?

In order to be eligible for CBILS, your business must:

From 25 September 2020 businesses applying for CBILS 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 (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.

Further guidance and support for businesses during the pandemic can be found on the Business Finance Guide website.

How do I apply?

You should approach your own bank/lender, preferably via its website. However, you can approach other lenders if your own bank refuses to assist you. Please note that in all probability the first question you will then need to answer is why is your current lender not supporting you!

Decision-making on whether you are eligible for CBILS is fully delegated to the 40+ accredited CBILS lenders. You can find the CBILS SME checklist here.

What else should I consider before I apply?

If you would like to discuss anything contained in this blog please email James McNeil in the first instance.

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