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COVID-19: Treasury opens up loans to larger businesses

20 April 2020: the government has overhauled its large business loan scheme to allow viable companies with a turnover of more than £500m to apply for government-backed support.

All eligible businesses with a turnover of £45m will be able to access the government’s Coronavirus Large Business Interruption Loan Scheme (CLBILS), the Treasury has announced.

Large businesses with turnovers of more than £500m were originally not able to access the funding support, which will be launched on Monday 20 April.

In a statement accompanying the announcement, Chancellor Rishi Sunak said: "I want to ensure that no viable business slips through our safety net of support as we help protect jobs and the economy. That is why we are expanding this generous scheme for larger firms.”

Commenting on the move David Petrie, ICAEW Head of Corporate Finance, said: “This is another helpful measure from government to bring cash into businesses, which is a matter of urgency for many medium-sized and larger British companies.

“However, firms will have important questions about eligibility criteria and the speed and complexity of the application process, which were problems we saw with the CBILS programme for smaller companies. And with many businesses now running very short of cash, we hope funds can be advanced in the short-term to save the thousands of companies battling to stay afloat as a result of the crisis.”

CLBILS is intended to provide lenders with a government-backed guarantee of 80% so they are able to offer facilities to viable businesses with an annual turnover of £45m or more that have seen their cashflow disrupted as a result of COVID-19.

The scheme is administered by the British Business Bank and is available to businesses via accredited lenders, a list of which will be available here. Lenders will pay a small fee to access the scheme.

Key features of the scheme

  • Up to £25m facilities for businesses with annual turnover from £45m to £250m
  • Up to £50m facilities for businesses with an annual turnover of over £250m 
  • Facilities: term loans, revolving credit facilities (including overdrafts), invoice finance and asset finance
  • Repayment terms: up to three years for all facilities
  • Personal guarantees: No personal guarantees 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.
  • 80% guarantee: The scheme provides the lender (i.e. the bank or alternative lender) with a government-backed, partial guarantee (80%) against the outstanding facility balance (and interest and lender fees), subject to an overall cap per lender.
  • The borrower always remains 100% liable for repayment of the debt.
  • If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.

Eligibility and additional features

Business size: a company must be UK-based in its business activity and have an annual turnover of over £45m. Other business entities (sole traders, freelancers, limited partnerships, limited liability partnerships etc) must have an annual turnover of over £45m, generate more than 50% of turnover from trading activity and operate the business activity through a business account.

Viability: A business must submit a borrowing proposal to a bank or approved alternative lender which, “were it not for the COVID-19 pandemic, would be considered viable by the lender”. In effect, this means that the lender must believe that the provision of finance will enable the business to trade out of any short-to-medium term difficulty. This is a very important condition and means that businesses would be wise to prepare applications carefully and discuss their applications with both their preferred lender, accountant or business adviser.

Ineligible businesses and sectors: banks, building societies, insurers and reinsurers (but not insurance brokers); the public sector including state-funded primary and secondary schools; employer, professional, religious or political membership organisations, or trade unions.

Businesses that have utilised the Bank of England’s Coronavirus Corporate Financing Facility (CCFF) also cannot use CLBILS.

For the latest news and guidance on the ongoing impact of COVID-19 for businesses and accountants, visit ICAEW’s dedicated coronavirus hub.