Updated on 3 April 2020

The Coronavirus Business Interruption Loan Scheme (CBILS) was announced by the Chancellor in his Spring Budget 2020. It is temporarily replacing the Enterprise Finance Guarantee (EFG), with the British Business Bank offering a higher percentage guarantee over business loans to give lenders greater confidence in providing finance to SMEs. 

Chancellor Rishi Sunak announced on the 2 April that the CBILS programme is being extended so that all viable small businesses affected by COVID-19, and not just those unable to secure regular commercial financing, will now be eligible should they need finance to keep operating.

The government is also stopping lenders from requesting personal guarantees for loans under £250,000 and making operational changes to speed up lending approvals. The government will continue to cover the first twelve months of interest and fees.

The British Business Bank initially offered to guarantee up to 80% of a funding line, subject to a maximum of £1.2 million however this was increased to £5.0 million on 17 March 2020.In new announcements made on 20 March 2020 this scheme will now be interest free for 12 months.

To be eligible to apply for CBILS, you must meet the following criteria:

• Be UK based with turnover less than £45 million per annum
• Operate within an eligible sector
• Have a sound borrowing proposal (i.e. be an attractive company) but with insufficient security (assets) to meet a lender’s requirements

• Not have received de minimis state aid beyond €200,000 in the current or previous two fiscal years

We are in regular contact with funders to get the latest on this policy in practice and will post updates here as we receive them. For now, more information can be found here.

If there is a need for immediate funding you should explore your options as soon as possible.

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Responding to criticism of how the big banks were applying the scheme, Chancellor Rishi Sunak announced the following amendments this morning (3 April):

• CBILS will match the commercial rate of interest to reflect the current low Bank of England interest rates
• Coronavirus businesses interruption loan is no longer a last resort, but can now be sought before other commercial sources of finance
• Lenders are now banned from demanding personal guarantees for loans under £250,000
• The government is amending the operation of the loan to speed up approvals for the scheme 
• A new coronavirus large business interruption loan scheme (CLBILS) would offer up to £5m for large firms (£45m-£500m) not currently eligible for support loans
• The government will still be responsible for the loan’s first year of interest and fees.

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Rishi Sunak has also  now announced the Coronavirus Large Business Interruption Loan Scheme (CLBILS) to ensure that more firms are able to benefit from Government-backed support during the COVID-19 pandemic. See more on CLBILS here. 

How to approach banks

Most banks are maintaining that it is business as usual, as far as possible, and that they are here to support their customers throughout these unprecedented times. Several of the major British banks have set-up dedicated COVID-19 helplines for their customers to call for guidance and information. Business owners should look to take advantage of all the support available to them and take the opportunity to speak to their lenders about concerns they have.

Proactive, regular communication with lenders is recommended. If you are predicting a down-turn in trade or your cash-flow projections reveal a potential liquidity issue in the next couple of months, it is best to speak to your bank as soon as possible to discuss the potential impact on your business. The quicker you raise any concerns, the better chance you might have to get the flexibility that your business might need over the coming months. It may also afford you more time to discuss a range of options and solutions.

Banks and mortgage lenders have also to offer customers three month-payment holidays. Businesses should look to take advantage of this where it is felt their business will benefit, therefore discuss this with your bank at the earliest opportunity.

Keep in touch with your bank as much as possible over the next few months and talk to us if you need a sounding board to discuss your lending and cash-flow needs, or to assist with producing any information requested from your bank. The banks, together with the Government and your advisers are here to help whilst we’re all in this together.