One of the measures outlined in the Government post budget Coronavirus briefings on 17 March 2020 was the Coronavirus Business Interruption Loan Scheme (“CBILS”).
Whilst the details will not be ready until Monday, as government interacts with the Lenders, this is in effect a rehashing of the Enterprise Finance Guarantee Scheme (“EFG”) launched after the 2008 banking crisis.
The CBILS is expected to work with the Government covering the first 12 months of interest payments, so businesses will benefit from lower initial repayments. The business remains liable for repayments of the capital.
The main differences between CBILS and EFG is an increase in guarantees from the government to the Lender from 75% to 80% and the increases in the maximum amount from £1m to £5m. The Lenders will include all the high street banks plus a range of other challenger banks.
Finance terms are from three months up to ten years for term loans and asset finance and up to three years for revolving facilities and invoice finance.
TO BE ELIGIBLE FOR SUPPORT VIA CBILS, THE SMALL BUSINESS MUST:
- Be UK based, with turnover of no more than £41 million per annum
- Operate within an eligible industrial sector (a small number of industrial sectors are not eligible for support or subject to limitations)
- Be able to confirm that they have not received state aid beyond €200,000 equivalent over the current and previous two fiscal years
- Have a sound borrowing proposal, but insufficient security to meet a lender’s normal requirements
NB Full eligibility criteria will be published when the scheme goes live w/c 23 March 2020
The main question for the Lender will be whether the client is a “good business” that could service the loan repayments.
If it could, but the Lender could not support due to lack of tangible security, then the government guarantee is there to support the Lender in order to de-risk that lack of security.
The EFG scheme was initially launched in haste and the application of the scheme was left to the interpretation of the various Lenders meaning take-up was low.
The lack of initial usage meant that the government expanded the lending panel so that now there are various challenger banks and asset-based lenders operating the scheme.
It is suspected that the banks will focus on their existing clients and therefore they should be the first port of call, but it does mean that there are alternatives this time if the incumbent lender cannot help. We also understand banks might prioritise into those that are immediately impacted and those where it might take longer to work through.
Coronavirus Business Interruption Loan Scheme – Press release