Improvements to CBILS: what you need to know
6 April 2020: last week, improvements were announced to the Coronavirus Business Interruption Loan Scheme to ensure more businesses can access government support.
Since the Coronavirus Business Interruption Loan Scheme (CBILS) launched less than two weeks ago, almost 1,000 facilities valued at £90.5m have been approved by lenders, but the original scheme was not thought to be meeting the needs of businesses or fulfilling the intention of the Government.
To rectify this, adjustments have been made to the CBILS scheme, and for companies who fell into the gap between CBILS and the COVID Corporate Financing Facility (CCFF), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) has been announced to enable banks to make loans of up to £25m to firms with an annual turnover of between £45m and £500 m. Details of this additional scheme should emerge shortly.
The scheme is then delivered through 40 lenders who are accredited by the British Business Bank (BBB) a development bank wholly owned by HM Government which sits under the Department for Business, Energy and Industrial Strategy (BEIS). In his Twitter Q&A on 3 April the Chancellor added: “The other thing is that the Gov is bringing on new providers as quickly as it can, usually that is a process that takes weeks, and that has been sped up and there will be more institutions ready to offer these loans next week which will further broaden competition and choice for businesses.”
Under the scheme, lending banks are provided with a guarantee for 80% of lending. This guarantee is between the government and the bank, therefore the borrower is liable for 100% of the debt. 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.
The CBILS scheme got off to a rocky start, asking small business owners to offer up personal assets for security, and pointing applicants to commercial, rather than the government-guarantee-backed products. However, the following new features to the scheme make funds easier for businesses to access:
- Businesses can self-certify they have been impacted by COVID-19
- Banks must not ask for personal guarantees for facilities under £250,000
- Banks can ask for personal guarantees for facilities above £250,000 but recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility (the portion not guaranteed by the government)
- CBILS will now support lending to smaller businesses even where a lender considers there to be enough security or where they would already be eligible to borrow on the bank’s commercial terms. This means more small businesses are eligible to receive the business interruption payment so benefit from lower initial payments and no fees
- Some lenders have indicated that they would not charge arrangement fees or early repayment charges
- For loans under £30,000, there are automated processes and a streamlined information portal.