The Coronavirus Business Interruption Loan Scheme (CBILS) is now available through participating lenders. CBILS is a new scheme, announced by The Chancellor at Budget 2020, that can provide facilities of up to £5m for smaller businesses across the UK who are experiencing lost or deferred revenues, leading to disruptions to their cashflow.
CBILS supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance. The scheme provides the lender with a government-backed guarantee potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’. The borrower always remains 100% liable for the debt.
This scheme is just one of a number of measures announced by Government you can read the full list here.
- Up to £5m facility: The maximum value of a facility provided under the scheme will be £5m, available on repayment terms of up to six years.
- 80% guarantee: The scheme provides the lender with a government-backed, partial guarantee (80%) against the outstanding facility balance, subject to an overall cap per lender.
- No guarantee fee for SMEs to access the scheme: No fee for smaller businesses. Lenders will pay a fee to access the scheme.
- Interest and fees paid by Government for 12 months: The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.
- Finance terms: Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.
- Security: At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under. For facilities above £250,000, the lender must establish a lack or absence of security prior to businesses using CBILS. If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
- The borrower always remains 100% liable for the debt.
Source: British Business Bank
UPDATE 3rd of April
- Coronavirus Emergency business loan scheme revamped after criticism. The British Business Bank have released these following updates to the scheme:
- CBILS has now been significantly expanded meaning more smaller businesses across the UK impacted by the Coronavirus pandemic can access the funding they need.
- Access to CBILS has been opened up to those smaller businesses who would have previously met the requirements for a commercial facility but would not have been eligible for CBILS starting from Mon 6 April.
- Insufficient security is no longer a condition to access the CBILS.
- Personal guarantees cannot be taken for facilities under £250K by any lender under the scheme.
- Personal guarantees may be required for facilities above £250K but will be capped at 20% of the outstanding balance after business asset recoveries.
- Changes should be retrospectively applied by lenders for any CBILS facilities offered since 23 March 2020.
- However, the Treasury has not capped the interest rates banks can charge. For further information from the government click here.
Source: Beauhurst Resources for SMEs