The structure of the CBILS has been finalised, but discussions with the British Business Bank (BBB) on the scheme’s details, specifications and eligibility are still under way so the following overview only reflects the position as at 24 March. Additional information or clarifications may be published subsequently and will be found at the dedicated section of the BBB's website.
What's the CBILS?
The CBILS is being provided by the BBB through participating providers, and offers more attractive terms for both businesses applying for new facilities and lenders, with the aim of supporting the continued provision of finance to UK businesses during the COVID-19 outbreak.
How does it work?
The CBILS provides a lender with a government-backed guarantee for up to 80% of the outstanding facility balance (subject to an annual claim limit at portfolio level). This potentially enables a ‘no’ credit decision from a lender to become a ‘yes’. However, as the CBILS guarantee is to the lender and not the business, the borrower remains 100% liable for repayment of the facility supported by the CBILS (as with any other commercial transaction).
The government will cover the first 12 months of interest payments by paying a Business Interruption Payment directly to the lender, so businesses will benefit from lower initial repayments. The business remains liable for repayments of the capital.
What’s the maximum amount that can be lent, and for how long?
The maximum value of a facility provided under the CBILS will be £5 million (the original announcement suggested a maximum value of £1.2 million). However, there are tests that lenders will need to apply to determine the maximum amount available to a particular borrower by reference to certain financial information (e.g. turnover, annual wage bills etc).
Finance terms are from three months up to six years for term loans and asset finance and up to three years for revolving facilities and invoice finance.
When's the CBILS available?
The CBILS became available on 23 March 2020 and will remain open for 6 months, although this is subject to review and it could be extended.
What types of finance are available?
The CBILS supports a wide range of business finance products, including:
- Term facilities.
- Invoice finance facilities.
- Asset finance facilities.
However, not every participating lender offers all of these products. For details on specific lender offerings, visit the Accredited Lenders page on the dedicated section of the BBB website.
Which small businesses are eligible to apply for a CBILS guarantee?
The main eligibility criteria to qualify for the CBILs are that the small business must:
- Have a viable business proposition, finance for which will help the SME trade out of any short-to-medium term cashflow difficulty, and if the facility is granted, the SME should not go out of business in the short-to-medium term.
- Be UK based, with turnover of no more than £45 million per annum.
- Operate within an eligible industrial sector (a small number of industrial sectors are not eligible for support).
- Be able to confirm that they have not received the relevant de minimis State aid.
- Have a sound borrowing proposal, but insufficient security to meet the lender’s requirements.
There are a limited number of further eligibility restrictions that apply on a sector basis – these can be found here.
How can small businesses apply?
Businesses should contact participating lenders directly to apply and should not liaise with the BBB. The BBB advise that it should take around the same time to apply as a normal lending application.
Decision-making is fully delegated to the participating lenders.
How can a lender become accredited?
The BBB is experiencing considerable interest from lenders seeking information on accreditation to the CBILS. Their priority has been to implement the scheme through existing Enterprise Finance Guarantee (EFG) accredited lenders but they are now accepting new applicants who can apply by completing an Expression of Interest form.
If invited to progress with an application, the lender must then complete a formal proposal form and meet with the BBB who will also carry out due diligence. If successful, the lender will have to complete a number of preparatory steps e.g. entering into the legal agreement with the BBB, having the BBB's auditors carry out a process and systems check etc.
More detailed guidance can be found in this Guidance Document.
We are already advising clients on how to get to grips with the requirements of becoming a CBILS accredited lender. If you are an existing EFG accredited lender considering participating in the CBILS or another lender looking to join, we can help with both the process and the documentation you will need. Please contact any of us if you would like to discuss further.
Authored by Aine Kelly, Neelam Hundal and Jennifer Staniforth