Coronavirus Business Interruption Loan Scheme

23rd March 2020

In the Spring 2020 Budget the Chancellor announced that a ‘Coronavirus Business Interruption Loan Scheme’ (CBILS) will temporarily replace the Enterprise Finance Guarantee (EFG), becoming available over the coming weeks.

Provided by the British Business Bank, this will operate in a similar way to EFG, but will offer more attractive terms for both businesses and lenders, with the aim of supporting the continued provision of finance to UK businesses during the Covid-19 outbreak.

The British Business Bank’s CBILS facilitates business finance to smaller businesses that are viable but unable to obtain finance due to having insufficient security to meet the lender’s normal requirements. In this situation, CBILS provides the lender with a government-backed 80% guarantee against the outstanding facility balance.

CBILS supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance. To be eligible for support via CBILS, the small business must satisfy the following criteria:

  • 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).
  • Have a sound borrowing proposal which, were it not for the current pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short to medium term difficulty.

An accredited lender can use CBILS to help a borrower access from £25,000 to £5.0 million with an interest free repayment period of 12 months. In addition, the government will cover any lender-levied set up fees. Finance terms are from three months up to six years for term loans and asset finance facilities, and up to three years for overdraft and invoice finance. It is important to note that the borrower always remains 100% liable for the debt.

At the discretion of the lender, the scheme may be used for unsecured lending for facilities of under  £250,000. For facilities above this amount, the lender must establish a lack or absence of security prior to the business using CBILS.

To apply for a CBILS-backed facility, businesses should, in the first instance, approach one of the 40+ accredited lenders with their borrowing proposal. If the accredited lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so. Where the small business has a sound borrowing proposal but insufficient security, the lender will consider the business for support via the scheme. The following infographic highlights how the scheme will work (infographic courtesy of the British Business Bank):

British Business Bank Infographic

The British Business Bank has now announced details of the scheme which can be found here.

Whilst this is a crucial source of funding, businesses will still need to prepare a considered funding application. Having an up to date business plan, management accounts and cash flow forecasts available will all be critical to securing appropriate funding for your business during the pandemic. 

Bishop Fleming has a team of fundraising specialists ready to advise clients through Coronavirus. As a partner of Capitalise, we have access to 100+ lenders to provide businesses with the opportunity to secure the right kind of funding. Our Capitalise team will support you through all stages of the funding process.

Find out more about raising finance through Capitalise here.




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