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April 3rd 2020

Coronavirus: what's the latest on the Coronavirus Business Interruption Loan Scheme?

We previously reported on how the terms on offer for the Coronavirus Business Interruption Loan Scheme contained some major flaws, with borrowers being asked to put up personal security for the entire debt and lenders retaining the option to reduce the term of the loan or vary the interest rates after the initial interest-free period.

In the days since, massive political pressure has been put on the 40 lenders who operate the Scheme to relax the terms so that CBILS is more likely to deliver what the Government always intended - lower risk, low cost borrowing for viable SME's who have been impacted by Covid 19.

That pressure is now paying dividends (unlike the banks!). The FT reported yesterday that Rishi Sunak is ironing out the flaws in the Scheme; he has now said that viable companies will no longer be required to demonstrate that they have tried to get a loan on normal commercial terms, before being able to apply for a CBILS loan. Almost all lending in the small business sector is now likely to be carried out through the Scheme, at least for the time being.

Lenders have thankfully now dropped the requirement for personal guarantees on loans under £250,000, after interventions from ministers. Further, on loans above £250,000 the Treasury has now confirmed that lenders can only ask for personal guarantees on the 20% that is not backed by the British Business Bank.

The British Business Bank is also encouraging banks to restrospectively apply these measures where possible, as this article explains.

To date about £90m of CBILS loans have already been made to nearly 1,000 small companies across the UK - though there have been over 130,000 enquiries made about the Scheme.

New scheme launched for larger businesses

A new scheme announced yesterday, the Coronavirus Large Business Interruption Loan Scheme (CLBILS), will allow companies with a turnover between £45m and £500m to borrow up to £25m, largely guaranteed by the state.

The CLBILS is intended to fill a gap that until now existed in the new debt schemes, with many large businesses being unable to access either CBILS or the Covid Corporate Financing Facility (a scheme for very large companies to borrow from the Bank of England).

If you are considering applying for a CBILS loan, contact us for assistance.

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