The Coronavirus Business Interruption Loan Scheme (CBILS) is a government initiative to help UK small businesses affected by coronavirus to access finance.
About the scheme
The Coronavirus Business Interruption Loan Scheme (CBILS) provides financial support to smaller businesses (SMEs) across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak.
The scheme is a part of a wider package of government support for UK businesses and employees. Read more at the Government’s Business Support website.
CBILS has been significantly expanded along with changes to the scheme’s features and eligibility criteria. The changes mean even more smaller businesses across the UK impacted by the coronavirus crisis can access the funding they need.
Importantly, access to the scheme has been opened up to those smaller businesses that would have previously met the requirements for a commercial facility but would not have been eligible for CBILS. Insufficient security is no longer a condition to access the scheme.
This significantly increases the number of businesses eligible for the scheme.
Please note that as of 17 December, the Government has announced that the Coronavirus Business Interruption Loan Scheme (CBILS) will be extended until 31 March 2021.
The Coronavirus Business Interruption Loan Scheme (CBILS) is managed by the British Business Bank on behalf of, and with the financial backing of, the Secretary of State for Business, Energy and Industrial Strategy (BEIS).
The British Business Bank operates CBILS via accredited lenders, including various independent lenders, banks and other approved funders. CBILS gives these lenders a Government-backed guarantee to facilitate more funding.
To give you some breathing space, there can be a repayment holiday for up to the first 12 months. The Government will pay the interest during the first 12 months and any upfront fees chargeable by the lender, helping to reduce the overall cost. If you want to settle the loan early, there’s also no fees for full early repayment during this time. Some lenders have no early repayment charges or redemption penalties for the duration of the loan although others may incur some after this initial 12-month period.
Am I eligible for a CBILS loan?
To be eligible to apply for a CBILS loan you need to meet the following criteria:
UK-based business that’s been adversely affected by coronavirus
Turnover of over £200,000
Minimum 3 years of trading history
Over 50% of turnover from trading activity (e.g. not from investments)
Loan is for business purposes
Loan is primarily for trading in the UK
To help as many businesses as possible, the lender will assess whether they would have made you a loan offer in normal circumstances, regardless of the impact of Covid-19.
When taking out a CBILS loan, the business is liable for the full loan amount. If the business is unable to repay, the scheme provides a partial guarantee to the lender, not to the business. A personal guarantee is required for CBILS loans of over £250,000.
How it works
British Business Bank operates CBILS via its accredited lenders. There are over 100 of these lenders currently working to provide finance. They include:
high-street banks
challenger banks
asset-based lenders
smaller specialist local lenders
A lender can provide up to £5 million in the form of:
term loans
overdrafts
invoice finance
asset finance
CBILS gives the lender a government-backed guarantee for the loan repayments to encourage more lending.
The borrower remains fully liable for the debt.
Under the scheme, personal guarantees of any form will not be taken for facilities below £250,000.
For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but:
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;
a Principal Private Residence (PPR) cannot be taken as security to support a personal guarantee or as security for a CBILS-backed facility
ELIGIBILITY CRITERIA
Smaller businesses from all sectors can apply for the full amount of the facility. To be eligible for a facility under CBILS, a smaller business must:
Be UK based in its business activity, with turnover of no more than £45m per year.
Have a borrowing proposal which, were it not for the current pandemic, would be considered viable by the lender.
Self-certify that it has been adversely impacted by the Coronavirus.
Please note: The following are not eligible under CBILS:
Banks, Insurers and Reinsurers (but not insurance brokers);
Public sector bodies and;
State funded primary and secondary schools.
Key Features of the scheme
Finance of up to £5 million
Guarantee to the lender to encourage them to lend
Government pays interest and fees for 12 months
The maximum value of a facility provided under the scheme is £5 million, available on repayment terms of up to five years typically. We have some lenders who will go beyond this term.
The scheme provides the lender with a government-backed, partial guarantee against the outstanding balance of the finance.
The borrower remains 100% liable for the debt.
The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied charges.
Finance terms
Security
No guarantee fees for businesses
For term loans and asset finance facilities: up to six years.
For overdrafts and invoice finance facilities: up to three years.
Insufficient security is no longer a condition to access the scheme.
For all facilities, including those over £250,000, CBILS can now support lending to smaller businesses even where a lender considers there to be sufficient security, making more smaller businesses eligible to receive the Business Interruption Payment.
No personal guarantees for facilities under £250,000.
Personal guarantees may still be required, at a lender’s discretion, for facilities above £250,000, but they exclude the Principal Private Residence (PPR) 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.
There are no guarantee fees for SMEs. Lenders pay a fee to access the scheme.
What information do you require?
After you have completed our application form, you’ll need to send a few documents to finish your application. We may require:
Business bank statements for up to the last eight months
They must show:
The Account name and (where possible) the registered address. These must match the business you create the loan application for.
The sort code and account number.
All daily transactions.
A history of a minimum of six months (with the most recent being within one month of your loan application date. If you can select an exact date range, be as up to date as possible).
Latest full unabbreviated accounts
This must include:
Profit and loss
Detailed profit and loss
Balance sheet information
We may also ask for further additional information to support your case such as management accounts and forecasts etc.
FAQs
A personal guarantee is not required for CBILS loans of up to £250,000. However, when taking out a CBILS loan, the business is liable for the full loan amount. If the business is unable to repay, the cbils scheme provides a partial guarantee to the lender, not to the business. For CBILS loans over £250,000, a personal guarantee is required.
The Government’s guarantee is to the lender, not the business. Only when the business is unable to repay would the government’s guarantee come into effect.
The CBILS deadline has been extended to 31st March 2021. If you have not started an application for the CBILS loan scheme by the end of the day on 31st March, you won’t be able to get a CBILS loan.
With most of the loans we source using a CBILS loan you can borrow over 2 to 5 years, with nothing to repay for the first 12 months. There are some lenders who can provide longer terms in the right circumstances. A longer term makes the repayments lower and easier to service month to month which may enable the business to obtain a larger loan, but additional interest charges may apply and overall may cost slightly more.
The key difference between CBILS and BBLS is the amount you can borrow. BBLS loans range from £2,000 to £50,000. CBILS loans range from £50,001 to £5,000,000, allowing you to borrow more for your business.
Bounce back loans are a good option if you want to borrow up to £50,000. However, if you want to borrow more, either now or in the future, a CBILS loan could be a better option.
You can’t hold a Bounce Back Loan and a CBILS loan at the same time. However, if you have a Bounce Back Loan, you can still apply for a CBILS loan and, if your application is approved, you’ll then be asked to settle your BBLS loan.
Yes, in principle. However, this will be based on:
• Your ability to service that debt – you must inform any new lender of other loans so they can perform an affordability test.
• Check your terms and conditions – an existing lender may preclude you from obtaining new funding as part of their loan documentation and hence may prohibit additional lending without their knowledge or support.
