The COVID-19 Business Interruption Loan Scheme explained

At Simplyhealth, we work with a variety of businesses, from small and medium sized enterprises, such as dental and veterinary practices, to large corporate partners. We understand the importance of keeping up to date with correct and relevant information and the value of guidance, support and advice. In collaboration with our legal partner, Knights PLC, we’ve put together a suite of business resources to help you through this challenging time.

How does CBILS work for small businesses?

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 broader package of government support for UK businesses and employees. 

CBILS has been significantly expanded along with changes to the scheme’s features and eligibility criteria. The changes mean even smaller businesses across the UK impacted by the coronavirus crisis can access the funding they need.

Access to the scheme has been opened up to those smaller businesses who 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. The expanded scheme will be operational with lenders from Monday 6 April 2020.

The British Business Bank has details of the CBILS on their website.

A brief summary of the CBILS

• The scheme allows lenders to provide facilities of up to £5 million for up to 6 years, for term loans and asset finance and up to 3 years for overdrafts and invoice finance.

• As the scheme provides a guarantee to the lender, the business will be liable for the full amount of the loan.

• The government guarantee will step in if the business subsequently fails and is unable to repay the loan. Therefore this allows lenders to provide funding where they would normally require security from the assets of the borrower. 

Who is eligible for the CBILS?

• Any UK-based business with turnover less than £45 million can access the scheme through a participating scheme lender.

• The business must be able to demonstrate that, were it not for the Covid-19 pandemic, the business would be considered viable by the lender. 

• The lender must believe that the provision of this funding will enable the business to trade out of any short to medium term difficulty. 

• The scheme is open to businesses that would have previously met the requirements for a commercial facility but would not have been eligible for CBILS.

• Insufficient security is not a condition to access the scheme.

What are the costs and repayment for the Coronavirus Business Interruption Loan Scheme?

• The government covers the arrangement fees, interest and any other fees for the first 12 months.

• The business may need to make capital repayments on term loans or asset finance.

• It is anticipated that short to medium term capital repayment holidays will be available.

What’s the security for the CBILS?

• For any loans over £250,000, security will be required by the funder over the business assets (usually a debenture or floating charge).

• Personal guarantees may still be required. 

Larger Business Interruption Loan Scheme

• The Coronavirus Larger Business Interruption Loan Scheme (“CLBILS”) is an extension to the original CBILS scheme that will allow participating lenders to provide facilities to eligible borrowers of up to £25 million. 

• Loans backed by the government’s 80% guarantee will be offered at commercial interest rates.

• Any UK business with a turnover of between £45 million and £500 million will be eligible to access the scheme through a participating lender.