How to apply for the new Coronavirus Business Interruption Loan Scheme (CBILS) to help small business survive during the COVID-19 outbreak.
British Business Bank will deliver the loan scheme, which will support SMEs to access bank lending and overdrafts. Interest rates will be similar to current bank lending.
The government will provide lenders with a guarantee of 80 per cent of each loan – subject to a per-lender cap on the number of bad loans it can claim for.
The scheme will support loans of up to £5m per small business. This new guarantee will initially support up to £1.2bn of lending.
British Business Bank says that lenders such as high-street banks will not be taking primary residential property as collateral, at least on borrowing of up to £250,000 – unlike conventional business loans.
The idea is to give lenders more confidence in approving credit decisions for small businesses that have insufficient security to meet the lender’s normal requirements. More than 40 lenders including the big four banks - Barclays, HSBC, Lloyds and RBS - provide funds under the scheme as either loans, overdrafts or asset-based lending secured on equipment or invoices.
Finance terms will be from three months up to 10 years for term loans and asset finance and up to three years for revolving facilities and invoice finance. Lenders will not charge small businesses or banks for this guarantee.
However, the small business borrower will always remain 100-per-cent liable for the debt.
One concern is that because banks and other lenders would not be able to claim compensation from government until they had made every effort to reclaim the loan, this may push them into putting small business into liquidation or seeking bankruptcy orders against directors.
Coronavirus Business Interruption Loan Key Features:
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. Registered companies can borrow anything between £10,000 and £5m, while sole traders and partnerships and borrow anything between £25,001 and £5m.
80% guarantee: The scheme provides the lender with a government-backed, partial guarantee (80 per cent) 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, so smaller businesses will benefit from no upfront costs and lower initial repayments. After 12 months, the interest rate will be variable interest rate with option to fix.
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. Variable interest rate with option to fix after the initial interest free period
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 per cent liable for the debt.
Is Your Small Business Eligible For A Coronavirus Business Interruption Loan?
To be eligible for support via CBILS, your small business must:
Be UK based in its business activity, with turnover of no more than £45m per year
Operate within an eligible industrial sector
Confirm that you have not received €200,000 of state aid over the current and previous two fiscal years
Be unable to meet a lender’s normal lending requirements for a fully commercial loan or other facility, but would be considered viable in the longer-term.
Lenders Offering Coronavirus Business Interruption Loans:
ABN-AMRO
Aldermore
Arkle Finance Limited
ART Business Loans
Askif
Bank of Ireland
Bank of Scotland
Barclays
BCRS
Business Enterprise Fund
Calverton Finance
Chamber Acorn Fund
Clydesdale Bank
Compass Business Finance
County Finance Group
CWRT
Danske Bank
DSL Business Finance
Enterprise Answers
Finance for Enterprise
First Enterprise
GC Business Finance
Genesis
Haydock Finance
Hitachi Capital UK
HSBC
Let’s Do Business
Lloyds Bank
MSIF
Metro Bank
Natwest
Newable
Robert Owen
Santander
Secure Trust
Skipton Business Finance
SWIG Finance
RBS
TSB
UKSE
Ulster Bank
How To Apply For A Coronavirus Business Interruption Loan:
In the first instance, businesses should approach their own provider – ideally via the lender’s website. They may also consider approaching other lenders if they are unable to access the finance they need.