Coronavirus Business Interruption Loan Scheme hiked to £5m

The government has released details about how the Coronavirus Business Interruption Loan Scheme (CBILS) will work, increasing the maximum value of a facility under the scheme to £5m, up from £1.2m, and said it would be available to businesses with a maximum £45m turnover, reports Sara White 

The escalating coronavirus pandemic is putting immense pressure on businesses which are facing potential breaches of banking covenants, day-to-day cashflow and liquidity concerns, and fears over jobs. Since the business interruption scheme was first announced on 11 March at Budget 2020, and need urgent access to the financial support measures.

Although plans are not fully thrashed out 40 banks have signed up to the scheme, including Barclays, HSBC, Lloyds Bank, Nat West and RBS, the Coronavirus Business Interruption Loan Scheme will be provided by the British Business Bank through participating providers and will be available as early as possible next week.

The effective start date will be 23 March 2020. This has been confirmed by the Chancellor at the Friday press conference. 

The maximum value of a facility provided under the scheme will be £5m and it will be open to UK based companies with a turnover of no more than £45m per annum.

Eligibility criteria

To be eligible for support, the small business must:

  • be UK based, with turnover of no more than £45m per annum;
  • operate within an eligible industrial sector (a small number of industrial sectors are not eligible for support or subject to limitations);
  • have to confirm that they have not received de minimis state aid beyond €200,000 equivalent over the current and previous two fiscal years [EU state aid competition rules]; and
  • be unable to meet a lender’s normal lending requirements for a fully commercial loan or other facility, but would be considered viable in the longer term.

Finance terms will be available from three months up to 10 years for term loans and asset finance, and up to three years for revolving facilities and invoice finance.

The scheme provides the lender with a government-backed guarantee against the outstanding facility balance, potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’. The borrower always remains 100% liable for the debt.

The government will also cover the first 12 months of interest payments, increased from the original six-month period announced in the Budget on 11 March. The business remains liable for repayments of the capital.

The scheme will be provided by the British Business Bank through participating providers, and will offer more attractive terms for both businesses applying for new facilities and lenders, with the aim of supporting the continued provision of finance to UK businesses during the covid-19 outbreak.

The scheme will support a range of business finance products, including term facilities, overdrafts, invoice finance facilities and asset finance facilities.

The British Business Bank statement stated: ‘To apply for an CBILS-backed facility, businesses may wish to consider approaching one or more participating lenders to discuss their borrowing needs.’

Full eligibility criteria will be published when the scheme goes live week commencing 23 March 2020’.

ICAEW, ICAS, ACCA, Responsible Finance, UK Finance and NACFB are stakeholder partners in the scheme.

State aid rules are designed to prevent the distortion of competition and trade across EU member states.

The definition of state aid is very broad because ‘an advantage’ can take many forms. It is anything which an undertaking (an organisation engaged in economic activity) could not get on the open market.

British Business Banking information on HBILS
Correct at time of publication 20 March 2020 [subject to change]

Treasury factsheet Issued 18 March 2020 [subject to change]

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