CBILS

Coronavirus Business Interruption loan scheme (CBILS)

If your small-or medium-sized business in England is facing cash flow issues as a result of coronavirus, please read the following information:

a new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will launch at the start of next week to support businesses to access bank lending and overdrafts.
the government will provide lenders with a partial guarantee of 80% on each loan to give lenders further confidence in continuing to provide finance to SMEs.
the government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value. The first 6 months of these loans will be interestfree, as the Government will cover these payments.
businesses will be able to get finance under the scheme from a large number of providers, including the main high street banks, as of next week.
businesses will remain responsible for repaying any facility they take out.
for further information, please visit: www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils-2/

Q&A

WHICH SMES ARE ELIGIBLE FOR CBILS:

Are businesses with private equity investment eligible under the CBIL Scheme, subject to them meeting the CBILS eligibility criteria?

If a business has a private equity investor, even where that investor holds a majority or controlling stake, they can still be eligible for CBILS.

When assessing the £45 million turnover eligibility threshold, the business will be considered separately to the private equity investor, and its other investments. If the business’s turnover is below that threshold, they can be eligible for the CBILS, provided they meet the other eligibility criteria.

To determine the maximum amount available to a business under CBILS, the business is treated as standalone from its private equity investor, and the other businesses it may have invested in. Therefore the £5 million maximum loan size applies to that business only.

Can companies that have received support from the Enterprise Investment Scheme (EIS) apply for CBILS?

Companies that have received funding through EIS are in principle eligible for support from CBILS, provided that they satisfy the other criteria.

Are financial services firms eligible for CBILS?

In principle they are eligible, including non-bank financial institutions, (secured and unsecured lenders); FCA-regulated financial intermediaries (such as credit brokers, finance houses, equipment renting/leasing businesses, financial intermediation firms); and firms that offer independent financial advice/services on financial matters (for instance accountants, auditors, mortgage brokers).

However, deposit-taking banks, building societies and insurers writing contracts of insurance as principal are not eligible for CBILS.

Are membership organisations eligible for CBILS?

Business, employer, professional, religious or political membership organisations or trade unions are in principle eligible.

Are housing associations eligible for CBILS?

Housing associations which are partly or mainly grant-funded will not be eligible.

Are public-sector organisations eligible for CBILS?

If the organisation is classified as a public-sector organisation by the Office of National Statistics, it is not eligible for CBILS.

If a company with UK employees exports over 80% of its services, does this class as a UK business activity?

Yes, it does. This would be a UK trading activity even if the company’s income comes wholly or mainly from exporting.

Are exporters eligible?

Export businesses are in principle eligible and welcome into the scheme. (For loans under £30,000, the loan cannot be used for certain activities outside of the UK. A borrower may self-certify the loan isn’t going to be used for these purposes.)

Is an SME based overseas eligible?

An SME which is foreign-owned is in principle eligible to apply for CBILS, provided it is trading in the UK (not just selling into the UK and has the core of its business operations in the UK) and uses the CBILS facility to support its business activity in the UK. The same is true for an SME which has UK ownership but is registered abroad.

USEFUL DEFINITIONS:

What kinds of businesses are eligible for the CBIL Scheme?

Businesses with a turnover of £45 million or less are eligible under CBILS. An SME can also be a sole trader or a partnership, as well as a limited company, under the CBILS definition.

What is “turnover“ for the purpose of checking eligibility for CBILS?

If it is a sole enterprise it is the turnover of the applicant only, as shown in the latest set of accounts. For applicants acting as part of a group, that have partners or linked enterprises, the turnover assessment should take the latest turnover of the applicant, as shown in their accounts, together with the turnover of any linked enterprises, any partners of any linked enterprises, any enterprises linked to any of the applicant’s partners and any enterprise linked to the applicant’s linked companies.

What is a “sole enterprise”?

A sole business (for the purposes of CBILS) is one that holds no more than 25% of the capital or voting rights (whichever is higher) in one or more other businesses; and/or other businesses hold no more than 25% of the capital or voting rights (whichever is higher) in them; or it is not linked to another business according to the criteria for “linked enterprises”.

In addition, certain investors may individually have a stake of up to 50% in the business and it may still be considered a sole business[1] : public investment corporations, venture capital companies[2] and business angels[3] (provided the investment is less than €1.25 million), universities and non-profit-making research centres, institutional investors, (including regional development funds)[4] ,or autonomous local authorities (with an annual budget of less than €10 million and fewer than 5,000 inhabitants).

What is a “linked” business?

Linked businesses form a group by controlling the majority of voting rights of an enterprise, either directly or indirectly; or being able to exercise dominant influence over an enterprise.

Enterprises are linked when one holds a majority of the shareholders’ or members’ voting rights in another; or can appoint or remove a majority of the other’s administrative, management or supervisory body; or there is a contract between them enabling one to exercise a dominant influence over the other; or one can exercise sole control over a majority of shareholders’ or members’ voting rights in another. A typical example is a wholly owned subsidiary.

An enterprise is indirectly linked to a business if it is directly linked to an enterprise that is linked directly to the business.

What is a “partner” business?

A “partner” business is an enterprise that has certain financial partnership with another, without one exercising effective direct or indirect control over the other. They are not sole enterprises or linked enterprises.

This is the case where both hold 25% or more of the capital or voting rights in each other; and are not linked to other enterprises. Among other things, their voting rights in each other do not exceed 50%.

Are further education establishments (including sixth form colleges and vocational training establishments) eligible?

Further education establishments are in principle eligible if they satisfy the other eligibility criteria of the Scheme.
Note: Further education establishments are exempt from the requirement that 50% of the applicant’s income must be derived from its Trading Activity.

Are charities eligible?

Charities are in principle eligible if they satisfy the other eligibility criteria of the Scheme.
Note: Registered Charities are exempt from the requirement that 50% of the applicant’s income must be derived from its Trading Activity.

TURNOVER AND INCOME GENERATION:

Does CBILS require that eligible companies generate a certain percentage of annual turnover from trading activities?

An eligible SME must generate more than 50% of its income from trading – the sale of goods or services. CBILS is not designed to support shell companies. Registered charities and further education establishments are exempt from this requirement.

Is a company that derives income from property eligible for CBILS?

If it derives more than 50% of its income from commercial activity that generates turnover, whether or not this is with the intention of making a profit. This includes real-estate SMEs that derive income from property (including real-estate investment companies and housebuilders).

WHO CAN APPLY:

Is a CBILS facility available to existing customers of participating lenders or can an SME that is not an existing customer still apply?

CBILS is open to all eligible borrowers – your business does not need to be an existing customer of the lender you are approaching.

UNDERSTANDING WHAT IS MEANT BY A BUSINESS IN DIFFICULTY:

Which businesses meet the “business in difficulty” criteria?

A “business in difficulty” is one that, as at 31 December 2019, had:

accumulated losses of more than half of its subscribed share capital for limited companies, or for unlimited liability companies its capital; or
started, or had fulfilled the criteria to be put into, collective insolvency proceedings; or
previously received rescue aid that was yet to be reimbursed (or, in the case of a guarantee, terminated); or
received restructuring aid, and was still under a restructuring plan; or
(where it not meet the SME criteria) has fallen below solvency ratios for the previous two years.

What does the accumulated losses criteria for a “business in difficulty” mean?

The CBILS definition of a “business in difficulty” includes businesses that have accumulated losses that are greater than half of their subscribed share capital, as at 31 December 2019.

For a limited liability company, this means having accumulated losses greater than half of its capital, if deducting accumulated losses from the company’s reserves leads to a negative amount that exceeds half of the company’s subscribed share capital.

These criteria do not apply to SMEs that, on 31 December 2019, had existed for less than three years. That means that certain fast-growth businesses may not be eligible for the scheme (unless they are less than three years old).

What are “collective insolvency proceedings”?

These are as defined by the Commission Regulation (EU) 2015/848 of 20 May 2015, rather than the definition of “insolvency proceedings” in the Insolvency Act 1986. This means:

winding-up by, or subject to the supervision of, a court
creditors’ voluntary winding-up (with confirmation by the court)
administration
voluntary arrangements under insolvency legislation
bankruptcy or sequestration

The “voluntary arrangements” above include company and individual voluntary arrangements.

Receiverships, members’ voluntary liquidations and schemes of arrangement (under Part 26 of the Companies Act 2006) are not included.

What does “fulfils the criteria under its domestic law” mean in collective insolvency proceedings?

There is no official guidance from the European Commission on what this means. However, if a borrower is the subject of any of the proceedings listed above, or is not subject to any insolvency proceedings, but meets the criteria above, the borrower should be categorised as a “business in difficulty”.

What defines rescue aid or restructuring aid?

Rescue or restructuring aid is normally the subject of a specific state aid approval from the European Commission. For the avoidance of doubt, aid provided under the Enterprise Finance Guarantee Scheme is not rescue or restructuring aid.

What criteria must a company that is not an SME (because it has 250 or more employees) meet to not be considered as “in difficulty”?

For the two years prior to 31 December 2019, the book debt to equity ratio was greater than 7,5; and its EBITDA interest coverage ratio was below 1.0. A business must meet both to be classed as “in difficulty”.

SMEs are not required to meet these solvency ratios.

Which companies can be classed as SMEs for the “business in difficulty” definition?

This can include self-employed people; family businesses; and partnerships or associations regularly engaged in an economic activity. It also includes any micro, small or medium-sized business that employs fewer than 250 people and has an annual turnover of no more than £45 million.

Should the tests for a “business in difficulty” be on an individual or group basis?

You should calculate these on a group basis.

Are there any exceptions to the accumulated losses test?

The accumulated losses test does not apply if the business is an SME that, on 31 December 2019, had existed for less than three years; or is a trust or unincorporated association.

Are there any exceptions to a business having to be a “business in difficulty”?

For facilities under £30,000, the “business in difficulty” test does not apply as a facility of this level is considered to involve a de minimis amount of state aid.

How does the business in difficulty test apply to a charity or non-profit organisation?

If a charity or non-profit organisation provides goods and services and is a limited liability company or an unlimited liability company, the test should be applied as with other companies. Where it undertakes its activity through a subsidiary, the tests should be applied on a group basis. If it is a trust or unincorporated association, the accumulated losses test does not apply.

Can the CBIL Scheme be used to refinance an existing commercial facility?

You can, in certain circumstances, use a CBIL Facility to refinance existing debt. For example, where you are seeking to put your business on a more stable financial footing and/or improve your working capital position, then, in principle, a CBIL Facility could be provided. However, you will need to go through the Application Process in relation to a CBIL Facility and, to be eligible, you will need to fulfil the Eligibility Criteria.

Refinancing can be undertaken with or without an increase in the original borrowing. Any refinancing will be treated as a new facility and will be eligible for a CBIL Facility only where all Eligibility Criteria are fulfilled.

When using a CBIL facility to re-finance an existing commercial facility with the same lender, the lender will be subject to certain limits. If the existing debt is help with another lender to the one you are seeking to obtain a CBIL facility to refinance that debt, these lender limits no longer apply.

What is the Coronavirus Business Interruption Loan Scheme (CBILS)?

CBILS is a new scheme that can provide facilities of up to £5 million for smaller businesses across the UK that are experiencing lost or deferred revenues, leading to disruptions to their cash flow. CBILS supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance facilities.

Note: This scheme is just one of a number of measures announced by Government. You can find full details of the temporary, timely and targeted measures to support public services, people and businesses through this period of disruption caused by coronavirus here .

What are the new changes to CBILS?

CBILS has been significantly expanded along with changes to the scheme’s features and eligibility criteria. The changes mean even more smaller businesses across the UK impacted by the coronavirus crisis can access the funding they need. Insufficient security is no longer a condition to access the scheme.

Importantly, access to the scheme has been opened up to those smaller businesses that would have previously met the requirements for a commercial facility but would not have been eligible for CBILS. This significantly increases the number of businesses eligible for the scheme. The expanded scheme will be offered by lenders from Friday 3 April 2020 and operational from Monday 6 April 2020.

Important note: We have communicated that these changes should be retrospectively applied by lenders for any CBILS facilities offered since 23 March 2020. For any commercial (non-CBILS) facilities offered since the same date, providing the borrower meets the CBILS eligibility, lenders have been asked to bring these facilities onto CBILS wherever possible (e.g. where the lender is accredited to offer the same facility through CBILS) and changes retrospectively applied as necessary.

When can I access the scheme?

The scheme went live on Monday 23 March and will initially run for six months. The expanded scheme will be offered by lenders from Friday 3 April 2020 and operational from Monday 6 April 2020.

What are the key features of CBILS?

CBILS guarantees facilities up to a maximum of £5 million, available on repayment terms up to six years (for term loans and asset finance) and up to three years (for overdrafts and invoice finance facilities).

The scheme provides the lender with a government-backed guarantee against the outstanding balance of the facility.

There is no guarantee fee for SMEs to access the scheme. The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees.[5] You (the SME) will therefore benefit from no upfront costs and lower initial repayments.

Under the scheme, lenders will not take personal guarantees of any form for facilities below £250,000.

For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but:

they exclude the Principal Private Residence (PPR); and
recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied

For all facilities, including those over £250,000, CBILS can now support lending to smaller businesses even where a lender considers there to be sufficient security, making more smaller businesses eligible to receive the Business Interruption Payment. Where there is sufficient security available, it is likely that the lender will take such security in support of a CBILS facility.

A borrower’s/guarantor’s Principal Private Residence (PPR) cannot be taken as security to support a personal guarantee or as security for a CBIL-backed facility.

Note: It’s important that you are aware that you, the borrower, will always remain 100% liable for the debt. The CBILS guarantee is to the lender, not you as the SME.

How do I know if I’m eligible to apply?

Smaller businesses (SMEs) from all sectors can apply for the full amount of the facility, up to a maximum of £5 million.

To be eligible for a facility under CBILS, your business must:

be UK-based in its business activity
have an annual turnover of no more than £45 million
have a borrowing proposal which the lender would consider viable, were it not for the current pandemic
self-certify that it has been adversely impacted by the coronavirus (COVID-19).

Importantly, access to the scheme has now been opened up to smaller businesses facing cash-flow difficulties that previously would not have been eligible for CBILS because they met the requirements for a standard commercial facility.

You may therefore consider re-contacting your lender if you have previously been unsuccessful in securing funding.

One of the eligibility criteria is for the business to have an annual turnover of no more than £45 million. Would the £45 million turnover threshold be measured on the entirety of the Group or could the funding be taken by a single operating subsidiary?

Can the different companies within the group access their “own” guarantee?

If your business is part of a group, controlled on either a legal or de facto basis, the maximum turnover applies to the group undertaking. More than one company within the group can be considered for a CBILS facility but only if the consolidated group turnover does not exceed the £45 million annual turnover threshold. The qualifying period is 12 months preceding application.

What is the definition of an SME for CBILS?

Under CBILS, the definition of SME is confined to the turnover of an Applicant (or an Applicant’s group), which must not exceed £45 million. The Borrower cannot be an individual other than where the individual is a sole trader or a partner in a partnership and is acting in a business capacity.

What if my business has turnover of more than £45m and I would not be eligible for CBILS?

The new Coronavirus Large Business Interruption Loan Scheme (CLBILS) ensures that more firms are able to benefit from government-backed support during this difficult time. It provides a government guarantee of 80% to enable banks to make loans of up to £50 million to firms with an annual turnover above £45 million.

This should give banks the confidence to lend to more businesses which are impacted by coronavirus but to which they would not lend without CLBILS. Loans backed by a guarantee under CLBILS will be offered at commercial rates of interest.

How can I access the scheme?

CBILS is available through the British Business Bank’s 40+ accredited lenders, which are listed on the British Business Bank website here .

In the first instance, you should approach your own provider – ideally via the lender’s website. You may also consider approaching other lenders if you are unable to access the finance you need.

Decision-making on whether you are eligible for CBILS is fully delegated to the 40+ accredited CBILS lenders. These lenders range from high-street banks and challenger banks to asset-based lenders and smaller specialist local lenders.

You may therefore consider re-contacting your lender if you have previously been unsuccessful in securing funding.

Additional application notes:

Given there is a big demand for facilities now the scheme is live, we ask you to please:

consider applying via the lender’s website in the first instance – telephone lines are likely to be busy and branches may have limited capacity to handle enquiries due to social distancing
consider the urgency of your need – it is possible that some businesses may be looking for regular longer-term finance rather than “emergency” finance, and there may be other businesses with a more urgent need to speak with a lender

What supporting documents might I need to apply?

You will need to provide certain documents when you apply for a CBILS-backed facility. These requirements vary from lender to lender, but are likely to include:

Management accounts
Business plan
Historic accounts
Details of business assets

If you do not have everything listed here, a CBILS loan could still be an option to provide finance to support your business.

Note: For many customers approaching their existing lenders for a smaller facility, the process may be automated and therefore may not require the same level of documentation.

What are the fees to borrow under CBILS?

There is no guarantee fee for SMEs to use CBILS.

What types of finance are available and who offers which type?

CBILS supports a wide range of business finance facilities, including:

term loans
overdrafts
asset finance
invoice finance

Note: Not every lender can provide every type of finance listed.

CBILS is available through the British Business Bank’s 40+ accredited lenders, which are listed on the British Business Bank website here .

What types of businesses is CBILS for?

With the new expanded eligibility criteria, CBILS is designed to support a wide-range of smaller businesses (i.e. with an annual turnover of less than £45 million) across the UK who are impacted by the Coronavirus crisis.

Access to the scheme has been opened up to those smaller businesses who would have previously met the requirements for a commercial facility but would not have been eligible for CBILS. This significantly increases the number of businesses eligible for the scheme.

Is the scheme appropriate for start-ups?

Potentially, if your business activity is primarily UK-based. For early-stage businesses in their first two years of trading, the British Business Bank’s Start Up Loans programme (loans from £500 to £25,000 at interest of 6% per annum) may be more suitable.

Visit www.startuploans.co.uk for more information.

Will I need security to get a CBILS-backed loan?

Under the scheme, lenders will not take personal guarantees of any form for facilities below £250,000.

For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but:

they exclude the Principal Private Residence (PPR); and
recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied

A borrower’s/guarantor’s Principal Private Residence (PPR) cannot be taken as security to support a personal guarantee or as security for a CBIL-backed facility.

What do the new rules around personal guarantees mean?

For CBILS facilities below £250,000, personal guarantees cannot be taken by lenders in relation to the facility under the Scheme.

For CBILS facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but they exclude the Principal Private Residence (PPR) and recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied.

A worked example to show what this change will mean in practice:

£1 million facility
Business pays off £400,000, then defaults, owing £600,000
Lender recovers £100,000 from other business assets secured, such as a debenture (e.g. stock), leaving £500,000 outstanding
Call on personal guarantee is £100,000 (20% – not the full £500,000 as previously), leaving £400,000 as a loss
Government covers £320,000, lender loses £80,000

For any CBILS facilities offered prior to the change in terms, lenders are expected to apply the new requirements around the taking of personal guarantees.

Therefore, in instances where a personal guarantee has been taken for a CBILS facility below £250,000, the lender cannot make any demand on it or apply any proceeds from it in connection with the CBIL Scheme facility.

Do I need to provide evidence that I have a viable business?

Yes. You must show in your borrowing proposal that were it not for the current pandemic, the lender would consider your business viable.

You must also self-certify that your business has been adversely impacted by the coronavirus outbreak

I have an existing EFG facility with my lender that I need to discuss. What do I do?

If you have a query about an active EFG facility, you should approach your current provider – ideally via their website, and not through the British Business Bank.

Are there any restrictions on a borrower refinancing their EFG facility to a CBILS facility?

If you have a query about an active EFG facility, you should approach your own provider – ideally via their website, and not through the British Business Bank.

Any request for refinancing an existing EFG facility will be:

at each individual lender’s discretion
subject to certain limits, and you meeting the CBILS eligibility criteria

What’s happening to the old Enterprise Finance Guarantee (EFG) Scheme?

For existing users of the EFG Scheme, nothing has changed. New applications to the EFG scheme are temporarily suspended at this point in time. If you wish to apply for a financing facility, your lender will be able to assess if you are eligible under CBILS.

How long will CBILS run for?

CBILS will initially run for six months.

Are sole traders/freelancers eligible?

Yes, as long as their business activity is operated through a business account. CBILS is open to:

sole traders
freelancers
bodies corporate
limited partnerships
limited liability partnerships, and
any other legal entity carrying out business activity in the UK with:
- an annual turnover up to £45 million, and
- business activity operating through a business account operating in any sector[8]

The business must generate more than 50% of its turnover from trading activity.

I have had de minimis aid in the past. Can I still get a loan?

Yes, as long as you meet the scheme’s eligibility criteria. Any previous de minimis state aid does not impact your eligibility for CBILS and the lender does not need to take it into account.

CBILS operates as a notified scheme rather than under de minimis as EFG did. There is no interaction between any de minimis state aid a business previously received and the size of the CBILS facility it can access, should it be eligible.

I am getting other kinds of aid to help respond to the coronavirus. Can I still get a loan?

Yes. You will still be eligible for a loan but certain payments you receive may count towards the amount of Business Interruption Payment (BIP) – the payments the UK Government will make to cover interest and fees on your loan – you will be entitled to. In this instance, these payments are made under the Temporary Framework for State Aid measures to support the economy in the current COVID-19 outbreak.

Currently, the UK Government has not made any other payments under this state aid measure. We will publish details relating to any other payments that will count towards the BIP as and when we get them.