Coronavirus Business Interruption Loan Scheme opens up to SME applications across UK

By John Reynolds on Tuesday 24 March 2020

The scheme, which is demand-led, has had a mixed reception.

Coronavirus Business Interruption Loan Scheme opens up to SME applications across UK
Image source: Image provided by British Business Bank

The Coronavirus Business Interruption Loan Scheme (CBILS), which is aimed at helping small and medium-sized companies impacted by coronavirus by allowing them to borrow up to £5m at preferential rates, is open for applications.

The scheme, which was open for applications starting yesterday [ March 23], was announced during the Budget earlier this month to help businesses impacted by the outbreak of the virus.

The loans are being provided by the British Business Bank, through over 40 lenders and partners, and aim to support those businesses which are facing cash-flow pressures and want more finance.

The maximum value of a facility provided under the scheme will be £5 million.

The scheme, which will be demand-led, will give the lender a government-backed guarantee against the outstanding facility balance while the government will also cover the first six months of interest payments.

It is unclear at the moment the extent to which fintechs and startups will take advantage of the CBILS, which has not been without critics.

International consultancy Fideres said the scheme was "not fit for purpose", arguing the scheme is not simple, fast or fair, according to CityAM.

For example, it says it's not simple as it leaves individual banks to determine which businesses can obtain a loan on standard commercial terms; it's not fast as a business must shop around for the best offers and unfair as leaves taxpayers, employees and business owners vulnerable.

But the British Chambers of Commerce (BCC) called the initiative a "crucial step".

The BCC’s Head of Economics, Suren Thiru, said: “The Coronavirus Business Interruption Loan Scheme is a crucial step in getting credit flowing to firms who urgently need it during this difficult period.”

“The inclusion of an overdraft facility in the scheme is particularly welcome to those who are facing an immediate and significant loss of cashflow."

"We look forward to working with the British Business Bank and UK financial institutions to ensure that the scheme delivers cash to the front line as quickly as possible.”

Key details

-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.

-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.

Keith Morgan, Chief Executive, British Business Bank, (pictured) 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.”

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