The Coronavirus Business Interruption Loan Scheme (CBILS) is a government scheme to provide financial support to UK SMEs that are losing revenue and suffering cash flow disruption as a result of the Covid-19 crisis. In this article, we explain how the scheme works, who is eligible for it and how to apply.

The CBILS scheme is managed by the British Business Bank on behalf of the Secretary of State for Business, Energy and Industrial Strategy. The scheme is designed to support UK based SME businesses with a turnover up to £45m who have a viable business proposition and are struggling due to the coronavirus pandemic.

How it works

The British Business Bank operates CBILS via more than 40 accredited lenders. These include high street banks, challenger banks and other lenders (a full list of which can be found here).

Lenders who provide loans of up to £5m to eligible SMEs (see below) will receive a government-backed guarantee of 80% of the loan.

The government will also cover the first 12 months of interest payments and pay any loan arrangement fees (as a Business Interruption Payment).

Loans can be in the form of term loans, overdrafts, invoice finance and asset finance.

It is important to note that this is not a grant and the borrower remains liable for 100% of the debt.

Who is eligible?

The CBILS is available to a business affected by the coronavirus crisis that:

  • Is UK-based and operates in the UK
  • Has an annual group turnover of less than £45m
  • Requires a loan to support trading through short-to-medium term difficulty
  • Has a borrowing proposal that the lender would consider viable were it not for the current pandemic

Businesses from any sector can apply except for banks, insurers (but not insurance brokers), public sector bodies and certain educational establishments.

If a business borrowing £30,000 or more has accumulated losses greater than 50% of its share capital as at 31 December 2019, it will not be eligible for CBILS unless it is less than three years old or within seven years from its first commercial sale. This is likely to exclude a significant portion of SMEs.

Loan terms

CBILS guarantees facilities up to a maximum of £5m available on repayment terms of up to six years for term loans and asset finance, and up to three years for overdrafts and invoice finance facilities.

The scheme provides the lender with a government-backed 80% guarantee against the outstanding balance of the facility. However, in case of default lenders will follow their standard commercial recovery procedures before making a claim to the government for any shortfall.

Under the scheme, lenders will not take personal guarantees of any form for facilities below £250,000.

For facilities above £250,000, lenders may still require personal guarantees but:

  • they must exclude the guarantor’s principal private residence, and
  • recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied.

How to apply

Businesses can self-certify that they have been adversely affected by the Covid-19 crisis.

Applications should be made direct to one of the accredited lenders. Requirements vary from lender to lender, but lenders are likely to require the following:

  • Details of the loan including the amount, repayment period and what the money is to be used for
  • Evidence that you can afford to make the repayments in the form of:
      • Management accounts
      • Cash flow forecast
      • Business plans
      • Historic statutory accounts
      • List of assets

If your business holds an account with an accredited lender, it may be worth first getting in touch with your relationship manager for further guidance on how to apply.

How mgr can help

We would be happy to discuss with you whether you are eligible for the CBILS and can also assist you with preparing:

  • Your CBILS application
  • Cash flow forecasts
  • Business plans

For businesses with a turnover above the £45m threshold, the Coronavirus Large Business Interruption Loan Scheme (CLBILS) may be available, and we would be happy to discuss this with you.

The government is offering businesses and individuals help in a number of areas, and you can find more information on our dedicated webpage here. This is updated as and when the government releases further details.

If you would like to discuss CBILS with us, please contact us at covid19@mgr.co.uk or on 020 7625 4545.

Warning: The above is merely general guidance and should not be relied upon as formal advice. The advice we give to each client will depend on their specific circumstances. We suggest you take professional advice before taking any action in relation to the issues discussed above.