The Coronavirus Business Interruption Loan Scheme (CBILS)
The most headline-grabbing part of the package, this is a temporary loan scheme. There are currently no specific time limits on it; all we know is that it is temporary. The CBILS launches the week of 23 March and will be run through the government-run British Business Bank, via around 40 partners that are part of the existing Enterprise Finance Guarantee Scheme, which Starling isn’t currently eligible to be a part of.
Starling has submitted an application to be part of CBILS. Meanwhile it remains available and ready to support existing customers who have lending with it already and are experiencing financial difficulty. The key thing now is for businesses to get the help they need as soon as possible.
Under CBILS, the government will provide the accredited lenders with a free guarantee on 80% of each loan, up to a value of £5m, subject to per-lender cap on claims, for up to six years. The idea is that it will give lenders the confidence to continue lending to SMEs, even in the current very uncertain climate.
The government will also cover the first 12 months of interest payments and fees, where applicable, meaning that for the business taking out the loan, the initial repayments will be lower. Nor is it just loans – other types of finance will be supported by the scheme, including overdrafts, invoice finance and other asset finance facilities, dependent on individual lenders.
It is important to remember, however, that while the terms are favourable, the borrower remains 100% liable for the debt. Nor is there any guarantee a loan application will be successful.
To take out a loan, your first port of call should be your existing lender, not the British Business Bank. The government is urging companies to call their lenders as soon as possible to discuss their business plans.
The scheme is now open for applications. Companies are eligible if they are based in the UK with turnover of no more than £45m per annum. They must also operate within an eligible sector; there are a few – including banks, insurers, unions and education providers – that fall outside the scope. Companies must also be able to confirm they have not received State Aid beyond €200,000 (about £184,900 at the time of publication) over the current and previous two fiscal years. More information on eligibility is available on the British Business Bank’s website.