SMEs can get support through the government's Coronavirus Business Interruption Loan Scheme

A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, is launching to support primarily small and medium-sized businesses to access bank lending and overdrafts.

The government will provide lenders with a guarantee of 80 per cent 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.

Announced by the Chancellor at Budget 2020, the Coronavirus Business Interruption Loan Scheme (CBILS) has opened for applications  and can provide facilities of up to £5 million for smaller businesses across the UK which are experiencing lost or deferred revenues, leading to disruptions to their cashflow.

Delivered by the British Business Bank, through more than 40 accredited lenders and partners, the Coronavirus
Business Interruption Loan Scheme will support the continued provision of finance to UK smaller businesses (SMEs) during the Covid-19 outbreak.

Although the Budget announced that an initial £1.2 billion of government-backed lending would be availablethrough the new scheme, the government has since announced that it will be demand-led.

The Coronavirus Business Interruption Loan Scheme supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance facilities. The scheme provides the lender with a government-backed guarantee, potentially enabling a ‘no’ credit decision from a lender to become
a ‘yes’.

• Up to £5m facility: The maximum value of a facility provided under the scheme will be £5m, available on repayment terms of up to six years.
• 80% guarantee: The scheme provides the lender with a government-backed, partial guarantee (80%) against the outstanding facility balance, subject to an overall cap per lender.
• No guarantee fee for SMEs to access the scheme: No fee for smaller businesses. Lenders will pay a fee to access the scheme.
• Interest and fees paid by Government for 12 months: The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees[1], so smaller businesses will benefit from no upfront costs and lower initial repayments.[2]
• Finance terms: Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.
• Security: At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under. For facilities above £250,000, the lender must establish a lack or absence of security prior to businesses using CBILS. If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
• The borrower always remains 100% liable for the debt.

Eligibility criteria

Smaller businesses from all sectors can apply for the full amount of the facility. To be eligible for a facility under CBILS, an SME must:

• Be UK based in its business activity, with turnover of no more than £45 million per year
• Have a borrowing proposal which, were it not for the current pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty.

If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.

How to apply

CBILS is available through the British Business Bank’s more than 40 accredited lenders and partners, which are listed on the British Business Bank website.

In the first instance, businesses should approach their own provider – ideally via the lender’s website. They may also consider approaching other lenders if they are unable to access the finance they need.

Keith Morgan, Chief Executive, British Business Bank, said: “In this period of exceptional hardship for smaller businesses across the UK, it has been vitally important to get this new scheme up and running as soon as possible. Available from today, we hope this new scheme will enable lenders to provide the finance smaller UK businesses need, alongside other government measures, to help them survive the current economic disruption.”

Chancellor of the Exchequer, Rishi Sunak said: “We are working round the clock to do whatever it takes to protect our people and businesses. That means that we are not only taking unprecedented action but doing so at unprecedented speed, because we know that businesses and their employees need help now.”

Business Secretary Alok Sharma said: “We know that businesses are in urgent need of access to funding during these unprecedented times. The Coronavirus Business Interruption Loan Scheme will make it easier for banks to lend and businesses to borrow. This will ensure that credit keeps flowing to where it is needed, when it is needed.”

Stephen Jones, CEO, UK Finance said: “The banking and finance sector is committed and has the capacity to support viable businesses with their cashflow and investment needs. The CBIL Scheme is an important additional solution to the support banks and finance providers are offering SMEs to help them through the cashflow pressures they may increasingly experience during this unprecedented period.  Lenders who are accredited to offer finance under the scheme are moving as quickly as possible to provide this support which will be available through customers’ usual contacts.

“Many lenders have online channels which customers can use to access the scheme. Businesses don’t need to worry about the support running out as this will be available on an on-going basis for those eligible businesses that need it.”

Following earlier discussions with the banking industry, some lenders indicated that they would not charge arrangement fees or early repayment charges to SMEs borrowing under the scheme. HM Government greatly appreciates this approach by lenders.

Fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment.

The following trades and organisations are not eligible to apply: Banks, Building Societies, Insurers and Reinsurers (but not insurance brokers); The public sector including state funded primary and secondary schools; Employer, professional, religious or political membership organisation or trade unions.