Coronavirus Business Interruption Loan Scheme open for applications

Businesses will be able to access government support valued at £330bn through the Coronavirus Business Interruption Loan Scheme for SMEs and Covid Corporate Financing Facility for the largest corporations from 23 March

Chancellor of the Exchequer, Rishi Sunak, said: ‘We are working round the clock to do whatever it takes to protect our people and businesses. That means that we are not only taking unprecedented action but doing so at unprecedented speed, because we know that businesses and their employees need help now.’

Further measures will be announced shortly to ensure larger and medium sized businesses will be able to access additional credit lines as needed, the Bank of England also confirmed.

The Coronavirus Business Interruption Loan Scheme (CBILS) will provide government-backed loans of up to £5m to small and medium-sized businesses (SMEs) with turnover up to £45m.

The Bank of England’s Covid Corporate Financing Facility will provide a quick and cost-effective way to raise working capital for larger businesses who need it.

This is backed by a government advertising and communications campaign across TV, radio and social media to ensure that businesses are aware of the support available during the coronavirus crisis.

The SME Coronavirus Business Interruption Loan Scheme is now available for applications. Businesses should talk to their current bank lenders about using the scheme, which is provided by the British Business Bank.

This scheme will help any viable business with a turnover of up to £45m to access government-backed finance of up to £5m.

Interest payments and any lender-levied fees for businesses will be covered by the government for an initial period of up to 12 months.

The government will provide lenders with a guarantee of 80% on each facility to give lenders further confidence in continuing to provide finance to SMEs.

The scheme is available through more than 40 accredited lenders, which are listed on the British Business Bank website and include all the major high street banks, including Barclays, HSBC and NatWest, and is supported by a number of professional bodies including ICAEW, ICAS and ACCA.

The Bank of England’s new lending facility for larger businesses – the Covid Corporate Financing Facility - will also be open for applications from 23 March.

By purchasing short-term corporate debt – known as commercial paper – the scheme provides a quick and cost-effective way to raise working capital for companies who are fundamentally strong but are experiencing severe disruption to cashflows, helping businesses across a range of sectors to pay wages and suppliers.

The scheme is open to businesses that can demonstrate that they were in sound financial health prior to the impact of coronavirus. Companies who wish to use the scheme do not need to have issued commercial paper before. Commercial paper is an unsecured, short-term debt instrument issued by a company. 

The Covid Corporate Financing Facility will purchase sterling-denominated commercial paper, with the following characteristics:

  • maturity of one week to 12 months;
  • where available, a credit rating of A-3 / P-3 / F-3 / R3 from at least one of Standard & Poor’s, Moody’s, Fitch and DBRS Morningstar as at 1 March 2020; and
  • issued directly into Euroclear and/or Clearstream.

It will not accept commercial paper with non-standard features such as extendibility or subordination, for example.

Companies - and their finance subsidiaries - that make a material contribution to the UK economy are able to participate in the facility and they must make arrangements to use the facility directly with their banks.

Bank of England Governor, Andrew Bailey, said: ‘The Bank of England has taken a number of steps in recent weeks to support the UK economy through the economic shock caused by covid-19.

‘On Monday a new lending scheme, the Covid Corporate Financing Facility, will open to help businesses manage through this period of uncertainty. Combined with steps taken by the government, this will help companies through this difficult time and support the needs of the people of this country.

‘Further measures will be announced to ensure larger and medium sized businesses will be able to access the credit they need.’

Business secretary, Alok Sharma, said: ‘We know that businesses are in urgent need of access to funding during these unprecedented times. The Business Interruption Scheme will make it easier for banks to lend and businesses to borrow. This will ensure that credit keeps flowing to where it is needed, when it is needed.’

By Sara White

Useful links:

British Business Bank guidance: Coronavirus Business Interruption Loan Scheme (CBILS)

Bank of England guidance: Covid Corporate Finance Facility

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