CORONAVIRUS: THE CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME EXPLAINED

As a result of the disruption and uncertainty caused by the COVID-19 outbreak, businesses are under unprecedented pressure in terms of cashflow and payment obligations. Simon Hore, a partner in Thrings’ Banking and Finance team, takes a look at a new Government scheme which offer loans to SMEs of up to £5m.

The first step for any business with existing borrowing is to speak to their lender to establish how those existing facilities may be amended. This may include repayment holidays, increased borrowing or extended repayment periods.

If further funding is needed the Government’s new temporary Coronavirus Business Interruption Loan Scheme (CBILS) is likely to be relevant. This is a variation of the Government’s Enterprise Finance Guarantee (EFG) arrangements that were made available in 2008 amid the banking crisis, in order to encourage lenders to make business loans.

What is the CBILS?

CBILS is a new scheme that has been introduced by the Government to provide small and medium-sized businesses with access to funding during this period of disruption caused by COVID-19.

What are key features of CBILS?

• Facilities up to a maximum of £5 million;
• Term loan and asset finance facilities are repayable over six years or less;
• Overdrafts and invoice finance facilities for a term of three years or less;
• The Government will guarantee 80% of the loan to the lender;
• No interest repayments during the first 12 months and capital repayment holidays can be agreed for an initial period.

Who is eligible for a CBILS loan?

CBILS loans are available to businesses across all sectors, with the exception of banks, building societies, insurers and public sector, religious or political membership organisations if a borrower meets the following eligibility criteria:

• It is a company, partnership, LLP or sole traders;
• The business must be UK-based with an annual turnover of no more than £45 million;
• The loan facility would have been commercially viable for the lender if it weren’t for the advent of COVID-19.

What fees are payable in order to access a CBILS?

No fees are payable by the borrower to the Government in order to access a CBILS loan.

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