The Chancellor announced a second major round of financial stimulus on 20th March 2020 that included the Coronavirus Business Interruption Loan Scheme (CBILS) which commenced on 23rd March 2020.
On 3rd April, after difficulties experienced by businesses in accessing CBILS support from banks, the Chancellor expanded the scheme's reach and its terms:
On 12th April 2020, more than three weeks after it was announced, CBILS was reported (Sunday Times) as being "chaotic at best", with only about 5,000 loans being disbursed, as of 10th April 2020, despite over 300,000 inquiries being made of the accredited lenders. Blame has been attributed in equal measure to the British Business Bank, the 40 or so lenders in the scheme and to the Government.That improvements are needed to disburse much needed cash very quickly is not in doubt.
As at 15th April, some 6,000 CBILS loans totalling £1.1bn had been made against 28,400 applications (i.e. 21% of applicants have so far got loans). Also, HMRC agreed that businesses can apply to defer import VAT. The British Business Bank added 4 new accredited lenders to CBILS, which it hoped would improve the cash-to-business ratio.
On 16th April 2020, CBILS was extended by the Government to 'viable' businesses with a turnover of more than £45m and also above £250m. This extension is expected to cover up to 3,000 extra businesses and becomes operational for applications on Monday 20th April 2020.
On 23rd April 2020, The Coronavirus Large Business Interruption Loan Scheme (CLBILS) went live. The CLBILS will enable an alternative solution for those viable larger businesses with a turnover above £45 m suffering disruptions due Covid19. Like CIBLS, the new larger scheme is accessible to businesses from banks and lenders accredited by the British Business Bank.
As at 23rd April 2020, the Bank of England (BoE) confirmed that it had made available and/or procured a corporate loan funding pool for the banks to a total of £1.25 trillion by a number of means including: 1. £23 bn of BoE funds released in March 2020; 2. £7.5 bn in withheld bank dividends; 3. the funding to back the Government's guarantee of all CIBLS loans (as extended on 16th April 2020).
On 30th July 2020, as a result of UK Government lobbying, EU rules that were preventing businesses classed as ‘undertakings in difficulty’ were given the green light to apply for CBILS support. The relaxation of the rules relate to businesses in this category and which have fewer than 50 employees and a turnover of less than £9 million.
For businesses that don't qualify for CIBLS, the Government launched four other support schemes:
Details of CBILS are as follows:
For more granularity on CBILS see the British Business Banks' FAQs.
Larger businesses with a turnover of more than £250m, will be eligible for CLBILS loans up to £200m from accredited lenders. Companies borrowing more than £50 million are subject to restrictions on dividend payments, senior pay and share buy-backs during the period of the loan, including a ban on dividend payments and cash bonuses, except where they were previously agreed
These are micro-loan addition to CBILS with the following features:
The extension of CBILS' reach and the relaxation of its rules will come as further relief to SME owners and managers, who have experienced problems getting CIBLS loans approved and the much needed cash into their business accounts.
For more information on eligibility see the CBIs website guidance.
Asset Purchasing with CBILS loans: It is understood that CBIL loans can only be used for working capital requirements and cannot, because of existing State Aid rules, be used to buy productive assets, such as new vehicles by road haulage companies. There is further clarity expected on this from the Government.
Employee threshold for CBILS loans: A CBILS applicant under the original rules could have more than 250 employees, as long as its turnover is within the £45 million turnover per year limit and it is being assumed that there will be no employee limit for the expanded scheme.
Personal Guarantees (PGs) & Loan Security: the 44 or so accredited lenders on CBILS have been told that they cannot take security in the form of personal guarantees as security for loans up to £250,000. Above that figure, it is understood that PGs may be taken and may include charges on personal residences.
How to apply for a CBILS-backed loan facility
Questions banks may ask on a standard CIBLs application (i.e. non Bounce Back loans)
The following is an example of the information/questions businesses may be asked to provide by a bank to process an CIBLs application (each lender will have its questions and process):
Questions are courtesy of Duncan & Toplis
Important Health Warning for applicants for a CBILS loan
As we have pointed out before in our blog Coronavirus Business Support Package- Key lessons to be learned from the 2008 EFG , it is vital that all businesses thinking of applying for a CBIL-backed loan note and understand that the CBILS guarantee is to the lender and not the business. As with any other commercial transaction, the borrower is always 100% liable for repayment of the facility supported by CBILS.
The Chancellor, the Governor of the Bank of England, and the CEO of the FCA wrote jointly on 25th March to the CEOs of the UK Banks on the subject of COVID-19 and bank lending, saying that the priority for "..banks, building societies, government and the financial authorities- should now be to take all action necessary to ensure that the benefits of the [Government's support measures]..are passed through to businesses and consumers."
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