Since the initial announcement by the UK government of the package of financial support for business to help alleviate some of the economic pressures of the Coronavirus outbreak, there have been some difficulties around the terms of access to finance and a great deal of anxiety about getting the cash to businesses that need it, particularly in relation to the Coronavirus business interruption loan scheme (CBILS).
These teething problems, which largely centered around eligibility, the need for personal guarantees on loans and the slow speed and complexity of the process to access finance, were address by Chancellor Rishi Sunak, who announced several reforms to CBILS late last week.
- Personal guarantees for loans under £250,000 will be banned, this is welcome because taking on debt or more debt in the current economic climate poses an extra challenge to SMEs at an already difficult time.
- The 40+ banks that are offering CBILs will have to remove personal guarantees and transfer any business that has already been offered commercial loans terms to a coronavirus business interruption loan.
- For loans above £250k, guarantee requests will now only apply to the remaining 20% (above £250,000) that is not covered by government.
The government has now clarified that all viable companies will be allowed access to CBIL, not just those unable to secure regular commercial financing. In other words, it’s no longer only available as a ‘last resort’.
- For mid-tier companies, also known as the ‘stranded middle’ a new Coronavirus Large Business Interruption Loan Scheme (CLBILS) will ensure that more firms are able to benefit from government-backed support during this difficult time. It will provide a government guarantee of 80% to enable banks to make loans of up to £25 million to firms with an annual turnover of between £45 million and £500 million. Loans under this scheme, are understood not to be interest free. Please click here for more information on the Coronavirus Large Business Interruption Loan Scheme
Recap of eligibility criteria for CBILS:
Your business must:
1. Be UK-based in its business activity
2. Have an annual turnover of no more than £45 million
3. Have a borrowing proposal which the lender:
a) would consider viable, were it not for the COVID-19 pandemic
b) believes will enable you to trade out of any short-term to medium-term difficulty
Businesses from any sector can apply, except the following:
Banks and building societies
Insurers and reinsurers (but not insurance brokers)
Public-sector organisations, including state-funded primary and secondary schools
CBILS is available through the British Business Bank’s 40+ accredited lenders, which are listed on the British Business Bank website here.
For further information, please see FAQs FOR SMEs: CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME (CBILS)