Coronavirus Business Interruption Loan Scheme (CBILS)

CBILS

The Government has taken a number of steps to provide temporary financial support to struggling companies during the pandemic. One offering was the Coronavirus Business Interruption Loan Scheme (CBILS).

Companies are still able to take advantage of the scheme with the current closing date being 30th September 2020. This may be extended, but no announcement to that effect has been made yet.

What is CBILS?

CBILS is managed by the British Business Bank on behalf of the Secretary of State for Business, Energy and Industrial Strategy (BEIS).

CBILS enables companies who have been adversely affected by Coronavirus to access finance of up to £5million through accredited lenders. The finance can be obtained in the form of loans, overdrafts, invoice finance and asset finance.

The finance terms provide that any loans and asset finance must be repaid within six years. Overdrafts and invoice finance must be repaid within three years. No repayments are required for the first 12 months of the facility. Furthermore, the Government will pay the interest on the finance during the first 12 months through a Business Interruption Payment. This includes any facilitation fees charged by the lender

CBILS is open to SME businesses with an annual turnover of less than £45million.

CBILS has obvious cash flow benefits of postponed repayments and a financial advantage of not having to pay the first year’s interest. Also, unlike most commercial finance of a significant value, there is no requirement for the Directors of the company to provide a personal guarantee for finance of up to £250,000. Personal guarantees may be required for finance over £250,000 but the extent of any such guarantee is restricted and a Principal Private Residence cannot be taken as security.

Finally, in the event that the business of the company significantly improves and the company is in a position to repay the CBILS finance, there are no fees for early repayment.

Things to note 

CBILS is designed as a last resort for businesses that have been seriously impacted by COVID-19.

In order to access CBILS, the company must self-certify that it has been adversely affected. It is expected that Directors will have taken reasonable steps to reduce overheads and lower expenses before resorting to CBILS.

Making a false statement in order to obtain finance under CBILS will almost certainly land you in hot water. Even obtaining a loan under CBILS for your business that has experienced only some adversity could cause you difficulties.

It is also vital that a Director understands that, whilst the government provide a guarantee to the lender for 80 per cent of the finance value, the responsibility for repaying the entirety of the finance lies with the Company. Failure to adhere to the terms, including repayment in full, could cause the lender to take enforcement action. This may include commencing winding up proceedings.

If you are concerned about your Company’s financial position or you think you may need legal advice regarding your personal position as a director of a company that is in financial distress, please contact us for a confidential discussion.