CBILS – Coronavirus Business Interruption Loan Scheme

Summary of new measures:

  • Government introduces new measures to help support British business

  • Two new schemes are launched to provide finance for business: Coronavirus Business Interruption Loan Scheme (CBILS) and the Covid Corporate Financing Facility (CCFF)

  • CBILS launched on 23rd March and provides smaller businesses with access to up to £5 million for a maximum of six years to eligible organisations, via British Business Bank accredited lenders

  • The Covid Corporate Financing Facility, announced on 17th March to provide support for major UK businesses

  • April 2020 sees a third scheme added to fill the gap between the previous two initiatives – the Coronavirus Large Business Interruption Scheme known as CLBILS

The outbreak of COVID-19, commonly known as coronavirus, in the Chinese city of Wuhan in Hubei Province, has had a major impact across the globe.

Governments have had to take serious measures to slowdown the spread of the coronavirus, unprecedented in peacetime. As a result, governments have had to step in to support businesses through this difficult time, by announcing new measures to assist companies to help ensure their survival.

Although the full economic shock from the coronavirus is still not fully understood, the UK’s economy has, and will most probably continue to weaken over the coming weeks and months. Disruptions to supply chains and extensive business interruption has put pressure on cash flows and could increase the demand for working capital.

As a response to the economic shock and seemingly never-ending uncertainty, UK government, through the British Business Bank, has announced two new schemes to support businesses through this difficult time – the Coronavirus Business Interruption Loan Scheme and the Covid Corporate Financing Facility (CCFF). Both are explained in more detail below, including information on eligibility and terms.

Coronavirus Business Interruption Loan Scheme

In response to the COVID-19 outbreak, the UK government has set out various new financial measures to support businesses, including a temporary Coronavirus Business Interruption Loan Scheme CBILS. This is now launched and will support smaller businesses so they can access overdrafts, term loans, asset finance and invoice finance through a panel of banks and lenders approved by the British Business Bank. The banks and approved lenders will be provided with a government-backed guarantee for 80% of the outstanding value.

Highlighted below are key points about how the CBILS will work in practice:

Government-backed guarantee: The government will give lenders an 80% guarantee on the funding provided (but there will be a cap on each lender’s claims) – this means that in normal circumstances where there might have been a negative decision from a lender due to the credit position of the business, this could become a yes. The accredited lender, and the businesses they lend to, will not be charged by the government for the guarantee.

Value: The CBILS loan can provide funding up to £5 million

Repayment: The first 12 months of the CBILS loan are interest-free, with those first 12 months of interest payments covered by the government, so the first year of repayments will be lower

No fee for SMEs: businesses borrowing via this scheme will not be charged a guarantee fee. Although the accredited lenders will be required to pay a fee to access the scheme.

Timeframes: The loan and asset finance terms range are up to six years, and for invoice finance and revolving facilities, up to three years

Security: The scheme can be used to provide unsecured lending, subject to the lender’s discretion. This applies to facilities of £250,000 or less. Amounts over this amount will require the lender to determine if there is an absence of security before funding the business via CBILS. If it is possible to provide finance on a normal commercial basis, then the lender should do so.

It is vital to remember that the borrower will still be 100% responsible for the debt liability.

Eligibility criteria

For a business to be eligible for CBILS, they must fit the following eligibility criteria:

  • Based in the UK
  • Have an annual turnover of no more than £45 million
  • Confirm that the business has not received state aid of more than the equivalent of 200,000 Euros over the last two financial years
  • Is not able to meet the lender’s standard requirements for financing on normal commercial terms, but would be considered as a viable borrower in normal circumstances if it were not for the pandemic
  • Belong to an eligible business sector. The following organisations types are not eligible to apply: public sector organisations, including state funded primary and secondary schools; employer, professional, religious or political membership organisation or trade unions; banks, building societies, insurers and reinsurers (but not insurance brokers). Additionally, fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment.

How to apply for the Coronavirus Business Interruption Loan Scheme

Applications are made directly to a British Business Bank accredited lender. However, as brokers, the Maxxia group works with the majority of the accredited asset finance providers and we are well positioned to assist in supporting you in making applications and sourcing appropriate solutions. If you’d like to discuss your options, please fill in your details here and we’ll be in touch promptly.

The Covid Corporate Financing Facility (CCFF)

On 17th March 2020, Chancellor of the Exchequer Rishi Sunak MP announced the new COVID-19 Corporate Financing Facility (CCFF). The aim of the CCFF is to help large, solvent companies to navigate through the financial disruption caused by the coronavirus outbreak.

The intention of the CCFF is to support companies who have cash flow issues, which would normally apply for market-based finance for its working capital. It is a cost-effective and quick way for companies to raise working capital.

How does it work?

The Bank of England has formed the Corporate Financing Facility Limited. This will buy Commercial Paper (CP) (short-term corporate debt) of up to one-year maturity.

The Fund will buy newly-issued Commercial Paper on the primary market through dealers. After the eligible counter-parties have issued the CP, it will go to the secondary market. These purchases will be made at a minimum spread over reference rates.

Central bank reserves will finance the purchases.

Eligibility

The eligibility factors for the CCFF include the following requirements for the company:

  • It must be a major employer in the UK
  • Is (or was before 1st March 2020) of sound financial health; for companies, this would mean having an investment grade A3/P3/F3/R3 or above for the short-term, or a long-term rating above BBB-/Baa3/BBB- by at least one of the major credit ratings agencies: S&P, Moody’s, Fitch or DBRS Morningstar
  • Has a headquarters in the UK
  • Has been incorporated in the UK (including companies with parent companies incorporated abroad, and with a business in the UK)
  • Has a major UK revenue
  • Serves many customers in the UK
  • Operates several sites in the UK

How to apply

For further information, please visit the Bank of England website here. If you believe you are eligible for the CCFF, the Bank of England recommends contacting your bank to discuss this further.

How to get help

If you are looking for finance support, either through the British Business Bank Business Interruption Loan Scheme CBILS, or other routes such as business asset finance, refinance, invoice finance or loans, please get in touch and one of our broker business specialists will be in touch to help.

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2020-05-05T12:47:21+00:00March 25th, 2020|Categories: Asset Finance|

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