Coronavirus: Update Business Interruption Loan Scheme (CBILS)

On the day that the UK’s efforts to halt the spread of Covid-19 were significantly ramped up

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Coronavirus: Update Business Interruption Loan Scheme (CBILS)

On the day that the UK’s efforts to halt the spread of Covid-19 were significantly ramped up, the CBILS was officially launched as part of a wide-ranging raft of measures to assist SMEs to deal with cashflow problems resulting from the global Covid-19 crisis.

CBILS loans will temporarily replace and therefore are largely expected to follow the framework of the existing Enterprise Finance Guarantee loan scheme (EFG). Under CBILS the lender benefits from a government-backed guarantee of 80% of the loan amount (it is worth noting that the borrower remains 100% liable for the debt). This guarantee is designed to expediate the credit approval of loans by accredited lenders so that cash can be made available to businesses in a timely manner.

In addition to loans, there are other funding products available which will be backed by the CBILS depending on the chosen provider including overdrafts, invoice finance and asset based lending.

Key details:

• Maximum term loan amount of £5 million.
• Repayment terms are from three months up to six years for term loans and asset finance and up to three years for revolving credit (overdrafts) and invoice finance facilities.
• An initial interest holiday for businesses of 12 months with the Government covering the interest payments during this period.
• The loan must be used for a business purpose.
• A lender may provide an unsecured CBILS loan of up to £250,000.
• In order to provide a loan above £250,000 the lender must establish a lack of available security.
• If the lender can offer finance on normal commercial terms without the need to make use of CBILS, they will do so.
• CBILS are initially due to be available for a six month period.

Broadly, to be eligible a business must:

• be a UK based SME, with turnover of no more than £45 million per annum (provided that at least half of this is generated from trading activities);
• operate within an eligible industrial sector (a small number of sectors are ineligible);
• have not received de minimis State aid beyond €200,000 equivalent over the current and previous two fiscal years; and
• have a sound borrowing proposal, but insufficient security to meet the lender’s usual requirements (although, personal guarantees might be required).

The take up of the EFG loan scheme was fairly mixed with lenders often still required to undertake diligent credit approvals given their exposure to the lending, notwithstanding the significant Government guarantee. Now that the details have been confirmed and the CBILS officially launched, the ability of lenders to process loan applications and make money available to businesses will be crucial to head off the cashflow problems which many businesses are going to face.

The Finance team at Keebles have extensive experience of assisting borrowers and accredited lenders with the successful completion of loans provided under the EFG loan scheme.
For the latest information regarding the CBILS please visit the CBILS website or contact the Finance team at Keebles.

If you would like to discuss how we can assist with CBILS loans, please contact Michael Hall at michael.hall@keebles.com or on 07583 016983 or James Burdekin at james.burdekin@keebles.com or on 07525 930817.

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