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COVID-19: CBILS
what you need to know

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Coronavirus Business Interruption Loan Scheme (CBILS) | what you need to know

Published: 23rd April 2020
Area: Coronavirus
Author: Lisa Botterill

The Government has announced a series of measures designed to support people and business through the uncertainty and challenges caused by the coronavirus pandemic.

The disruption it is causing is likely to continue for the foreseeable future and with this in mind the package of measures continues to be updated with further information from the Government and their criteria and application will develop over time.

Businesses are at the sharp end of the economic challenges but there are financial measures specifically designed to help different sized organisations. These should be carefully considered and if applicable, a combination of the support being offered by the Government should be able to offer businesses some short term relief.

What is CBILS?

The Coronavirus Business Interruption Loan Scheme (CBILS) is one of the measures that was introduced by the Government in March as one of the key initiatives to support SMEs with accessing vital funding. The CBILS scheme has been designed to offer some assistance to eligible businesses, giving small and medium-sized businesses (those with an annual turnover of up to £45 million) access to finance of up to £5 million.

The scheme is backed by the Government, but there are currently over 40 accredited lenders working to provide finance, and each lender will have its own eligibility criteria.

Interest in the scheme has been high, but recently released figures shows that only £1.1bn of loans has been granted so far to SMEs in the UK under the scheme, which is part of a wider package of £330bn support, even though the Treasury has pledged to underwrite 80% of loans, to encourage lending.

Some business have reported having difficulties accessing the scheme, reports of some lenders not being supportive or having aggressive terms and it has been indicated that the Government will revisit some elements of the scheme to ensure it is operated in the way it was originally intended.

How does CBILS work?

CBILS operates via a panel of accredited lenders and there are currently over 40 lenders working to provide finance which include: High Street banks, challenger banks, asset-based lenders and specialist lenders.

Loans can be provided up to £5m in the form of term loans, overdrafts, invoice finance and asset lending. Importantly the borrower remains responsible for all repayments and fully liable for the debt. Under the scheme, personal guarantees of any form will not be taken for facilities below £250,000.

For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but:

• recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied;
• nobody’s home can be taken as security to support a personal guarantee or as security for a CBILS-backed facility

The CBILS scheme is one of a range of measures for businesses which include the CLBILS, for businesses with annual turnover between £45m and £250m providing access to up to £25m of loans, launched on 20 April and the Future Fund, suitable for businesses that rely on equity investment and are unable to access the CBILS. This will be launching in May 2020.

There is no doubt that financial support is out there for businesses but now more than ever with many companies planning for life beyond coronavirus, the new normal, it’s important to make sure you fully understand your options and resulting obligations.

How we can help

Following a number of enquiries, our team has developed a fixed fee service for clients and contacts who have applied for, or are considering applying for the CBILS scheme.

It is critically important that businesses understand their commitments, so this service will review documentation and support business on the legal terms they are agreeing to.

For more information about this service, download our guide here or please contact Lisa Botterill or Adam McGiveron or another member of the corporate team in your local office.

Contact us

Shakespeare Martineau has launched a free legal helpline offering bespoke guidance on a range of subjects from employment and general business matters, through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too.

Available from 10am-12pm Monday to Friday, call 0800 689 4064.

General advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.

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