The latest in the government’s support packages for businesses impacted by the COVID-19 crisis is the Coronavirus Large Business Interruption Loan Scheme or CLBILS.
This is intended for those businesses which were stuck in the middle, finding themselves in need of funding but not eligible for either of the two schemes previous rolled out via the British Business Bank: the Coronavirus Business Interruption Loan Scheme (CBILS) and the Covid Corporate Financing Facility (CCFF).
What is CLBILS?
The newly announced Coronavirus Large Business Interruption Loan Scheme is an evolution of the earlier SME focused scheme, but this is targeted towards mid-sized and larger organisations, specifically those with a turnover of more than £45 million.
As with the existing CBILS, the newer version of the scheme will be administered by the British Business Bank.
This business interruption loan programme sets out to provide financial support to those eligible businesses that are losing revenues and having business finance and cash-flow impacted as a result of the coronavirus pandemic.
Why is it being introduced?
This is the third scheme from the British Business Bank packages intended to provide financial assistance to UK businesses.
The first two schemes rolled out were the CBILS targeting SMEs and the Covid Corporate Financing Facility which is designed for investment-grade businesses.
A gap between these meant that mid-sized and larger business which didn’t qualify for either were left without access to finance support. The latest scheme, CLBILS, is intended to fill that gap by providing a scheme for businesses with a turnover greater than £45 million, which was the limit for the original scheme.
What is the purpose of the Coronavirus Large Business Interruption Loan Scheme?
As part of the range of support introduced by the government via the British Business Bank, the scheme aims to aid UK businesses by continuing to provide access to funding during the COVID-19 outbreak.
This is a temporary measure to help businesses survive the impacts of the lockdown and likely on-going disruption to trade and cash-flow.
Finance can be provided in the form of loans, asset finance, invoice finance or revolving credit facilities. Businesses will be liable for 100% of the repayments on any form of borrowing introduced via the CLBIL scheme.
Criteria to be eligible for the Coronavirus Large Business Interruption Loan Scheme:
- The business must be UK based and have a turnover in excess of £45 million per year
- Most business types can apply, including sole traders, limited companies, limited partnerships, LLPs. Not eligible are: most credit institutions, public sector organisations, trade unions, employer, professional, religious or political membership organisations, insurers and reinsurers, banks and building societies.
- The business needs to confirm that it has been negatively impacted as a result of COVID-19
- The borrowing proposal should have (in the absence of the impacts of the pandemic) been considered a viable lending proposition.
- The lender needs to ascertain that the finance provided via the scheme will enable the borrower to trade out of the short and medium-term challenges currently faced.
- Businesses which have received finance via the Covid Corporate Financing Facility are not eligible
How do businesses apply?
There are a number of accredited lenders, a list of which can be found on the British Business Bank website. Note that not all lenders can provide all types of finance.
Businesses should contact lenders to discuss their requirements- the British Business Bank does not deal with applications directly.
How does the scheme work?
Finance is available for a minimum of three months, up to a maximum of three years.
The scheme gives the lender an 80% government-backed guarantee against the outstanding balance of the funding provided, however, the borrower remains 100% liable for repayment of any facility supported by CLBILS.
Personal guarantees of any form will not be taken for facilities below £250,000, however for facilities above £250,000, personal guarantees may still be required, but claims cannot exceed 20% of losses after all other recoveries have been applied.
Finance can take various forms, i.e. asset finance, revolving credit facilities which includes overdrafts, loans, and invoice financing.
Funding can be provided up to £25 million to businesses with an annual turnover from £45 million up to £250 million, and up to £50 million for those with a turnover over £250 million.
Note that the lender and borrower are still able to enter into finance agreements outside of the scheme, for example, if there is no economic benefit to the borrower of taking out CLBILS supported finance when compared to normal commercial lending.
What other support is available?
As mentioned earlier, CLBILS is one of three government schemes run via the British Business Bank.
For businesses that don’t meet the eligibility criteria for finance through the large business scheme, the other programmes are:
Coronavirus Business Interruption Loan Scheme (CBILS): For SMEs with an annual turnover below £45 million. These businesses can borrow between £25,000 and £5 million through the scheme, with the government guaranteeing 80% of finance loaned and covering the first 12 months of interest payments.
Covid Corporate Finance Facility (CCFF): Designed for corporates with an investment-grade credit rating. Here, the Bank of England buys short term debt from the companies.
Outside of these British Business Bank initiatives, funding may be available through traditional routes of banking or asset finance providers.
Looking for help?
Within the Maxxia group, we have finance specialists who can help you in understanding your options, finding an accredited lender and navigating through the application process.
We are working with a number of clients to help them apply for the British Business Bank schemes, as well as sourcing other financing solutions during these challenging times.
If we can be of any assistance, please complete the form below and one of our finance specialists will be in touch.