CBILS: UK Government-backed initiative to support SMEs during the pandemic

CBILS: UK Government-backed initiative to support SMEs during the pandemic

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Small and medium-sized businesses now have access to financial support through the Coronavirus Business Interruption Loan Scheme (CBILS).

Launched on 23 March 2020, and expanded on 2 April 2020, the scheme enables businesses to address cash flow issues caused by COVID-19.

The initiative is a central component in a broader package of government support for UK businesses and employees.

Introduced on 23 March 2020, and subsequently revised on 2 April 2020, the Government has expanded the features and eligibility criteria of the CBILS.

This expansion seeks to provide financial support to a greater number of small and medium-sized businesses impacted by the coronavirus outbreak.

A key update to the 23 March 2020 iteration now also allows businesses with sufficient security to be eligible for the scheme.

CBILS: How the scheme works to support businesses

British Business Bank operates CBILS via its network of over 40 accredited lenders, including:

  • High-street banks
  • Challenger banks
  • Asset-based lenders
  • Specialist local lenders

A lender can provide up to £5 million through a range of mechanisms, including:

  • Loans
  • Overdrafts
  • Invoice finance
  • Asset finance

The CBILS gives the lender a government-backed 80% guarantee for loan repayments to encourage greater lending to businesses. However, the borrower remains fully liable for the debt incurred.

Under the scheme, personal guarantees are not required for sums below £250,000. For debt above this threshold, personal guarantees may be required.

Key features of the scheme

  • Finance of up to £5 million – The maximum value of a loan is £5 million, available on repayment terms of up to six years (subject to eligibility and some restrictions).
  • Guarantee to the lender – The scheme provides the lender with a government-backed guarantee of 80% on each loan to encourage lending to small and medium-sized businesses.
  • The Government pays interest and fees for 12 months – A Business Interruption Payment made by the Government covers the first 12 months of interest payments and any additional charges levied by the lender.
  • Finance terms – Finance terms of up to six years (subject to credit approval) for term loans and asset finance and up to three years for overdrafts and invoice finance facilities.
  • Security – Since being revised at the start of April, the updated scheme now also allows firms with sufficient security to be eligible for the Business Interruption Loan Scheme.
  • No guarantee fees – Lenders pay a small fee to access the scheme, whereas businesses are not required to pay guarantee fees.

Eligibility criteria

On 2 April 2020, the Government updated the criteria and personal guarantee requirements, so businesses previously ineligible can now receive support.

The following eligibility requirements apply:

  •  The business must be UK-based.
  • Annual turnover must not exceed £45 million.
  • The business must have a borrowing proposal which, were it not for the pandemic, would be considered viable by the lender.
  • The business must explain how it has been adversely affected by the economic impacts of the outbreak.

Before a payment is made, lenders will need further information before the Business Interruption Payment is approved, including:

  • Details of the loan, including the required amount, detailed expenditure plans and repayment schedule.
  • Supporting documents, including management accounts, cash flow forecasts, a business plan, historic accounts, and details of assets.

The above requirements will vary according to the lender.

How Isosceles can help

Related Article | Coronavirus: How to manage cash flow and working capital

At Isosceles, we can help businesses produce the required supporting documents. From management accounts and cash flow forecasts, to support with a business plan and historic accounts, our people can place a business in the most advantageous position from which an application for the CBILS can be made.

See British Business Bank CBILS FAQs for further information and find out what financial support businesses are eligible to receive.

Related Article | UK Government pledges £1.25bn support package to fast-growing firms

*All information is up to date at the time of writing (22 April 2020).

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