SME Business and Sole Traders: Coronavirus Business Interruption Loan

The following information is based on the information publishes as of 26 March. It is intended as an indication of how the scheme will work, as no detailed guidance issued yet.

CBILS (Coronavirus Business Interruption Loan Scheme) has been introduced by the UK Government as a temporary measure with the aim of supporting the continued provision of finance to UK SMEs during the COVID-19 outbreak. The scheme is designed to provide lenders with a government-backed guarantee to facilitate access to loans, overdrafts, invoice finance and asset finance.

Details of the Scheme

Guarantee of 80% on each loan is provided by government (subject to pre-lender cap on claims). 

Further help through Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees meaning no upfront fees and lower initial repayments. 

Eligibility Criteria

Viability: An SME must submit a borrowing proposal to a bank or approved alternative lender which, “were it not for the current pandemic, would be considered viable by the lender”. In effect this means that the lender must believe that the provision of finance will enable the business to trade out of any short-to-medium term difficulty. This is a very important condition and means that SMEs would be wise to prepare applications carefully and discuss their applications with both their preferred lender, accountant or business advisor.

Lack of security: The scheme may be very attractive for smaller companies in that for facilities of £250k and under, the CBIL Scheme may be used for unsecured lending. However businesses should remember that the borrower always remains liable for repayment of the debt. For facilities over £250k, the CBIL Scheme still requires you to establish a lack or absence of collateral.

Additional flexibility around industry sectors: Facilities are also available to cover companies and individual traders operating in sectors not previously covered by the Enterprise Finance Guarantee scheme such as: haulage, agriculture, fisheries and aqua-culture.

Company size: To be eligible a company must have a turnover of no more than £45m and meet certain other criteria, such as having fewer than 250 employees.

Ineligible businesses and sectors: Fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment. The following trades and organisations are not eligible to apply: banks, building societies, insurers and reinsurers (but not insurance brokers); the public sector including state funded primary and secondary schools; employer, professional, religious or political membership organisations, or trade unions.

How to Access the Scheme?

To apply, you should talk to your bank or one of the 40 accredited finance providers (not the British Business Bank) as soon as possible, to discuss your business plan. You can find out the latest on the best ways to contact them via their websites. Please note that branches may currently be shut down to enable social distancing.

The full rules of the scheme and the list of accredited lenders are available on the British Business Bank website.

If you have an existing loan with monthly repayments you may want to ask for a repayment holiday to help with cash flow.

Important Note

If someone texts, calls or emails claiming to be from HMRC, saying that you can claim financial help or are owed a tax refund, and asks you to click on a link or to give information such as your name, credit card or bank details, it is a SCAM.