The Coronavirus Business Interruption Loan Scheme (CBILS)
No Repayments at all for first 12 months!
Aimed at companies that have been trading for 12+ months, need finance for growth beyond Bounce Back Loans, but are likely to get turned down by their bank
In March 2020 in response to the coronavirus pandemic, Chancellor of the Exchequer, Rishi Sunak, announced the Coronavirus Business Interruption Loan Scheme (CBILS) through the British business Bank (BBB) The aim of CBILS is to support businesses in urgent need of bank funding by providing lenders with a guarantee of 80% of loan value to support lending to SME’s with a turnover of up to £45 million.
A critism of CBILS has been that funding has been too slow to reach companies that have immediate cash flow pressures.
Bounce Back Loan Scheme (BBLS)
On May 4th 2020, the Bounce Back Loan Scheme (BBLS), was launched to help SMEs access up to £50,000 based on a maximum of 25% turnover, through an online application process as a self-declaration.
The key features of BBLS are
- Loans range from £2,000 up to 25% of a business’ turnover. The maximum loan amount is £50,000.
- The BBLS scheme provides the lender with a 100% government-backed guarantee against the outstanding balance of the finance (interest and capital). The aim is to support accredited lenders with a full guarantee to ensure speed of delivery under BBLS.
- The CBILS scheme provides the lender with an 80% government-backed guarantee against the outstanding balance of the finance.
- There are no fees to access the scheme for businesses or for lenders for both BBLS and CBILS.
- The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and no capital repayments are required for the first 12 months.
- All loans under BBLS are six year term loans, although early repayment without penalty is permitted at any time.
- The interest rate for loans under the BBLS scheme is set at 2.5%
- Lenders are NOT permitted to take any personal guarantees or to take recovery action in relation to a borrower’s personal assets (such as their main home or a personal vehicle). For sole traders or partnerships who do not have the benefit of limited liability, other personal assets may be at risk of recovery action.
- The borrower always remains 100% liable for the debt (the guarantee is to the lender, not the business).
To be eligible for a facility under BBLS, a business must be able to self-declare that it:
- has been impacted by the coronavirus pandemic;
- is engaged in trading or commercial activity in the UK and was established by 1 March 2020;
- has not already received a loan under BBLS (and nor has any other company within the same group);
- is not using (and no company within the same group is using) CBILS, CLBILS or the Bank of England’s Covid Corporate Financing Facility Scheme (CCFF), unless the BBLS loan will refinance the whole of the CBILS, CLBILS or CCFF facility;
- derives more than 50% of its income from trading activity (this requirement does not apply to charities or further education colleges);
- is not in one of the restricted sectors referred to above; and
was not a ‘business in difficulty’ on 31 December 2019. If it was a business in difficulty at such a date, the business must confirm that it complies with additional state aid restrictions and will not be used to support export-related activities.
- SMEs can include self-employed people, family businesses and partnerships or associations regularly engaged in an economic activity. It includes any micro, small or medium sized business that employs fewer than 250 people and has an annual turnover of no more than £45 million.