The Coronavirus Business Interruption Loan Scheme (CBILS)
The most headline-grabbing part of the package, this is a temporary loan scheme which Starling was accredited for on 11th April. The scheme actually launched on 23rd March and is running through the government-run British Business Bank and has no time limits confirmed as of yet.
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.
On the 3rd April 2020, the Chancellor announced further measures to assist business.
For SMEs, the CBILS has been expanded to cover all viable businesses impacted by the outbreak, not only those who can’t secure regular commercial financing. Also, lenders will now not be able to ask for personal guarantees on loans under £250,000.
For larger companies, the Government has established the new Coronavirus Large Business Interruption Loan Scheme (CLBILS). This provides a government guarantee of 80% for loans to firms with an annual turnover of between £45 million and £500 million.