Changes to Coronavirus Business Interruption Loan Scheme (CBILS)

Many small businesses that have applied for a government backed Coronavirus Business Interruption Loan Scheme (CBILS) loan thus far have been offered standard overdrafts and loans – without the Government’s 80% guarantee – on the basis that they fit the banks’ criteria for this type of lending.

The Chancellor has now confirmed that this is not the intention of his CBILS scheme and that from now on all businesses affected by the COVID-19 disruption should be offered a CBILS loan with the government guarantee. This change is underlined by the following statement in the press release:

“To maximise the support available, the Chancellor is extending the CBILS so that all viable small businesses affected by COVID-19, and not just those unable to secure regular commercial financing, will now be eligible should they need finance to keep operating during this difficult time”

A summary of other changes to the Coronavirus Business Interruption Loan Scheme are set out below.

• Lenders will be banned from requesting personal guarantees on loans under £250,000.
• For loans over £250,000 personal guarantees will be limited to 20% of any amount outstanding on the CBILS lending after any other amounts have been recovered from business assets.

These two changes will provide further reassurance for business owners. Not only will their homes be protected – lenders are already prohibited from asking business owners to put their house on the line – but will also limit the exposure to other personal assets. Reassuringly, these changes will apply to finance already offered under CBILS.

Further changes include:

• The Government encouraging operational changes to speed-up applications under the scheme.
• The government still covering the first twelve months of interest and bank fees.
• A new Coronavirus Large Business Interruption Loan Scheme (CLBILS) is to be made available to enable banks to make loans under the scheme of up to £25m (the present limit for the smaller scheme is £5m). This will allow firms with an annual turnover of between £45m and £500m access to the 80% government guarantee.
• The Government actively requesting that banks keep interest rates to “a reasonable level”. After all, base rates are at a record low…

These changes should make it easier for small and mid-sized firms to get access to funding that will support their efforts to survive the COVID-19 disruption. Readers who need to make an application would be wise to revise their business cashflow and other projections prior to making an application. This funding is a loan not a grant. The impact of loan repayments and interest charges after the first twelve months need to be considered as part of this planning process.

We can help you consider your options and prepare the necessary forecasts.