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Coronavirus Business Interruption Loan Scheme Update

On 3 April 2020 the UK government announced changes to the Coronavirus Business Interruption Loan Scheme (CBILS), under which SMEs may obtain loans of up to £5 million, to help them deal with the impact of COVID-19. Details of the scheme, as expanded, are available on the British Business Bank website. The government stated that over £90 million of loans to nearly 1,000 small and medium sized firms have been approved under CBILS since it was launched on 23 March 2020. However, in response to pressure from businesses, the government has made the following changes to CBILS, which applied from Monday 6 April:

  • Lenders will no longer be permitted to refuse applications for a CBILS loan on the basis that the applicant business is eligible for regular commercial financing; insufficient security is no longer a condition to access the scheme. Businesses that have previously been refused CBILS loans may re-apply.

  • Lenders will no longer be able to request personal guarantees for loans under £250,000. For facilities of more than £250,000, personal guarantees may still be required, at a lender’s discretion, but recoveries under these will be capped at a maximum of 20% of the outstanding balance after the proceeds of business assets have been applied and a Principal Private Residence may not be taken as security. The new rules will also apply to existing borrowers under the scheme.

  • Operational changes will be made to speed up lending approvals.

As before, the government will cover the first twelve months of interest and fees and will guarantee 80% of any CBILS loan. The maximum loan value is £5 million and an applicant must have an annual turnover of not more than £45 million.

The government has also announced a new Coronavirus Large Business Interruption Loan Scheme (CLBILS) under which the government will guarantee 80% of loans of up to £25 million to firms with an annual turnover of between £45 million and £500 million. Loans backed by a guarantee under CLBILS will be offered at commercial rates of interest. Further details of the scheme will be announced later this month which we shall report upon release.

We are currently providing assistance to clients looking to apply for such loans with up to date end of year or interim accounts. Contact us immediately to find out how we can assist you with refinancing, loans, or any other advice in relation to your business needs.