HM Insights

Coronavirus update – have you asked your bank about the Coronavirus Business Interruption Loan Scheme?

Today sees the welcome news for UK businesses that The Coronavirus Business Interruption Loan Scheme (CBILS), introduced by the Chancellor, is now open to applicants.

CBILS works by providing participating lenders with a government-backed guarantee for a borrower's facilities - potentially turning a 'no' credit decision into a 'yes'. It is aimed at supporting SMEs across the UK which are experiencing lost or deferred revenues, leading to disruptions in cashflow.

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CBILS may be applied to a range of business finance facilities, including term loans, overdrafts, asset finance and invoice finance.

The scheme is open to SMEs from across all sectors. In order to be eligible for CBILS, an applicant must:

  • be UK based in its business activities;
  • have an annual turnover of no more than £45 million; and
  • have a borrowing proposal that, were it not for the current pandemic, would be considered viable by the relevant lender, and for which the relevant lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty.

The key features of CBILS are:

  • Up to £5 million facility.
  • 80% guarantee: The scheme provides the relevant lender with a government-backed, partial guarantee (80%) against the outstanding facility balance.
  • No guarantee fee for SMEs to access the scheme: No fee for smaller businesses. Lenders will pay a fee to access the scheme.
  • Interest and fees paid by Government for 12 months: The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.
  • Finance terms: Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.
  • Security: At the discretion of the relevant lender, the scheme may be used for unsecured lending for facilities of £250,000 and under. For facilities above £250,000, the lender must establish a lack or absence of available security prior to businesses using CBILS. If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.
  • The borrower always remains 100% liable for the debt.

CBILS will be made available through participating accredited lenders. There are currently over 40 accredited lenders, which includes most high street banks, as well as a number of challenger banks, asset-based lenders and smaller specialist local lenders (the full list can be found on the British Business Bank website).

The types of facility available made available under CBILS will vary from lender to lender and the ultimate decision on whether or not an applicant is eligible for a facility rests with the relevant participating lender.

If you are an SME and concerned about your cashflows in the coming days, weeks and months as a result of Coronavirus outbreak, you may wish to check whether or not you can take advantage of CBILS.

Get in touch

Harper Macleod's trusted Banking & Finance team are on hand to provide specialist legal advice on your banking and finance issues during these difficult times.

Also, Harper Macleod's specialist teams across all sectors are ready, willing and able to help businesses and organisations deal with the impacts of Coronavirus – both current legal issues and preparing for what might come in the weeks ahead.

Please get in touch with a member of our team, or find out more throughout our website.

John Pringle | [email protected] | 0141 247 3338

Tony Cameron | [email protected] | 0141 227 9518

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