Coronavirus Business Interruption Loan Scheme

The new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, launched at the end of March 2020, to support primarily small and medium-sized businesses to access bank lending and overdrafts.

The Government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The Government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value.

Businesses can access the first 12 months of that finance interest free, as Government will cover the first 12 months of interest payments.

You are eligible for the scheme if: your business is UK based, with turnover of no more than £45 million per year and your business meets the other British Business Bank eligibility criteria.

The full rules of the Scheme and the list of accredited lenders is available on the British Business Bank website here in this link

All the major banks will offer the Scheme once it has launched. There are 40 accredited providers in all.

On April 3 various changes in the existing offering were announced together with an extension of the scheme to larger companies previously excluded.

A summary of the changes are set out below:

  • Banks are reported to be offering small businesses that meet their existing lending criteria overdraft and loans outside the CBILS loan arrangements. Banks are now instructed to offer all businesses – even those who qualify for regular bank loans and overdrafts – a CBILS arrangement. This means that banks are banned from requesting personal guarantees from lenders for loans under £250,000.
  • For loans over £250,000 personal guarantees will be limited to 20% of any amount outstanding on the CBILS lending after any other amounts have been recovered from business assets.
  • The above two changes will apply to CBILS loans already obtained prior to the 3 April announcement.
  • Government has also requested that applications are dealt with quickly.
  • A new Coronavirus Large Business Interruption Loan Scheme (CLBILS) is to be made available to enable banks to make loans under the scheme of up to £25m (the present limit for the smaller scheme is £5m). This will allow firms with an annual turnover of between £45m and £500m access to the 80% government guarantee.
  • Government is actively requesting that banks keep interest rates to “a reasonable level”. After all, base rates are at a record low…

Banks will no doubt continue to require updated accounts and management information to support a CBILS application.

NUNN HAYWARD’S PLANNING ADVICE:

You should talk to your bank or finance provider (not the British Business Bank) as soon as possible and discuss your business plan with them. This will help your finance provider to act quickly once the Scheme has launched. If you have an existing loan with monthly repayments, you may want to ask for a repayment holiday to help with cash flow.

Please call if you feel that this is something that you will need to consider. We can help you draw together the information required to support an application.

The information that we have provided is for general purposes only and therefore does not constitute professional advice. Appropriate professional advice should be sought for individual circumstances before any further action is taken.