COVID-19

COVID-19 interruption scheme: accessing funding

COVID-19: Business Interruption Loan Scheme

Businesses are the lifeblood of the UK and rightly one of the first areas of the economy the government moved to protect when launching the its relief efforts in response to Coronavirus.

In these turbulent times, access to government-backed funding has proven critical for many businesses and will continued to do so as they plot a course through fast-changing seas for the next 12 months and beyond.

The details of the Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus large Business Interruption Loan Scheme (CLBILS) are available from British Business Bank and open to applications through the approved lenders. A list of the approved lenders is shown below this article indicating those which are regionally focussed.

The deadline for completion and drawdown of funds under the CBIL and CLBIL scheme is 30 November 2020, subject to any further extensions.

CBILS Headlines

The scheme allows lenders to provide facilities of up to £5 million for up to six years, for term loans and asset finance, and up to three years for overdrafts and invoice finance.

It is important to note that, as the scheme provides a guarantee to the lender, the business will be liable for the full amount of the loan. The government guarantee will step in if the business subsequently fails and is unable to repay the loan. This therefore allows lenders to provide funding where they would normally require security from the assets of the borrower.

Eligibility

Any UK-based business with turnover less than £45 million is able to access the Scheme through a participating scheme lender. If your existing funder is not part of the Scheme, speak to your clearing bank or one of the other specialist providers. Each lender will have its own lending limits and therefore you may need to make a few calls to explore this.

You must be able to demonstrate that, were it not for the COVID-19 pandemic, your business would be considered viable by the lender. The lender must also believe that the provision of this funding will enable your business to trade out of any short- to medium-term difficulty.

The scheme is open to those businesses that would have previously met the requirements for a commercial facility but would not have been eligible for CBILS. Insufficient security is not a condition to access the scheme.

Borrowers must also demonstrate that they are not an “undertaking in difficulty” at the date of application under the scheme, being a business that:

  • had accumulated losses greater than half of their subscribed share capital (for limited liability companies) or capital (for unlimited liability companies);
  • had entered into collective insolvency proceedings or fulfilled the criteria to be put into collective insolvency proceedings;
  • had previously received rescue aid that was yet to be reimbursed or (in the case of a guarantee, terminated);
  • had received restructuring aid and were still under a restructuring plan; or
  • had (where that business is not an SME) fallen below solvency ratios (see further below) for the previous two years.

For larger businesses with more complex capital structures it is possible to restructure or recalibrate the balance sheet before submitting an application in order to mitigate the undertaking in difficulty restrictions (at the date of application) in relation to the accumulated losses and share capital test.

Costs and repayment

The arrangement fees, interest and any other fees are covered by the government for the first 12 months. You may need to make capital repayments on term loans or asset finance. However, we would expect that short to medium-term capital repayment holidays will be available.

Security

For any loans over £250,000, the funder will require security (usually by way of a debenture or floating charge) over your business’ assets. Personal guarantees may still be required, at a lender’s discretion, for such facilities, 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.

Lending requirements

Key things to have in place when speaking to your lender are:

  1. The last two financial years’ accounts and year to date management accounts
  2. Short term weekly cashflow forecast (13-weeks) including aged creditors and debtors
  3. Current year forecast outturn and two years of financial forecasts (the challenge to forecasting at this time will be understood by lenders and should reflect your best assessment of the impact on the business)
  4. Details of how the business has been affected by COVID-19 and managements plan to trade out of the situation
  5. If personal guarantees are required completion of an assets and liability statement by relevant directors or shareholders
  6. The steps the shareholders have taken to exhaust all other options to support the business (including equity injections)

Please see above our download, a full checklist of information to be reviewed and available to support COVID-19 lending applications.

We are on hand to support businesses through the ongoing challenges of COVID-19. If you have any questions about accessing or applying to the scheme, please do not hesitate to contact us.

CLBILS Headlines

The Coronavirus Larger Business Interruption Loan Scheme (CLBILS) provides potential access to liquidity for almost 10,000 UK businesses.

Eligibility

The CLBILS scheme allows participating lenders to provide facilities to eligible borrowers of up to £200 million backed by an 80% government guarantee at commercial interest rates. Any UK-based business with turnover between £45 million and £500 million is eligible to access the scheme through one of the 21 current participating lenders (Excludes subsidiary brands of the same ultimate lending institution).

Lending is available up to £200 million, capped at i) double the borrower’s annual wage bill or ii) 25% of the borrower’s total turnover for the last financial year. Term loans and revolving credit facilities over £50 million are offered by five CLBILS lenders which have secured additional accreditation. The maximum size for invoice finance and asset finance facilities is £50 million.

Lending guidelines and data requirements are similar to the smaller CBILS scheme, with a need to demonstrate viability absent due to the current COVID-19 crisis and based on the borrower’s liquidity needs for the next 12 months.

Costs and repayment

The maximum term of CLBILS borrowing is three years and any repayment schedule will be agreed on an individual basis. There are no interest or fee holidays available under the CLBILS scheme.

Certain restrictions exist for facilities greater than £50 million including:

  • Until the facility has been repaid in full, cash bonuses or pay rises to existing senior management are barred (unless agreed in writing prior to drawdown or consistent with prior year policy). This does not include senior management who join after the date of the facility.
  • Block on dividends and the payment of management /advisory fees to any shareholders until the facility has been repaid in full (subject to certain carve-outs).
Security

New lending is provided on a super senior or pari passu basis with other secured facilities currently in place with a borrower (noting specific carve-outs for certain security in relation to asset finance and invoice finance will however apply). The interaction of this security package will need to be discussed in detail with both your incumbent lender and the participating CLBIL provider.

Bounce Back Loan Scheme

The Bounce Back Loan Scheme (BBLS) was introduced on 4 May following significant lobbying and will support smaller businesses finding it difficult to access the CBILS loan scheme. BBLS provides fast tracked lending to help small and medium-sized (SME) businesses seeking to borrow between £2,000 and £50,000. The government has guaranteed 100% of the loan and there are no fees or interest payable for the first 12 months. Loan terms will be provided with a tenor of up to six years, priced at 2.5% and with the government settling any interest payable during the first 12 months.

Eligibility

To be eligible for the BBLS three criteria will need to be met; i) the business is UK-based; ii) they can clearly demonstrate that coronavirus has negatively affected the business; and iii) the business was not classified as an undertaking in difficulty as of 31 December 2019.

Although the business must not have received a loan (of up to £50,000) under the CBILS scheme to be eligible, they may elect to transfer the facility into the BBLS. Arrangements with the existing lender can be made up until 4 November 2020.

CBILS – Accredited Lenders

National

Banks
Specialist lenders
Barclays ABN AMRO Commercial Finance
HSBC Aldermore
Lloyds Bank Allied Irish Bank
Metro Bank ART Business Loans
Natwest Arkle Finance Limited (AFL)
Santander Ask Inclusive Finance (AskIf)
RBS Calverton Finance
TSB Compass Business Finance
Virgin Money/CYBG County Finance Group Ltd
Cynergy Bank Genesis Asset Finance
Haydock Finance
Hitachi Capital Business Finance
IGF
Newable
Paragon
Secure Trust Bank
Skipton Business Finance
ThinCats
UKSE

 

Regional

First Enterprise East Midlands
Business Enterprise Fund North East
Enterprise Answers (Cumbria) North West
GC Business Finance North West
Merseyside Special Investment Fund (MSIF) North West
Bank of Ireland (NI) Northern Ireland
Danske Bank (Nothern Ireland) Northern Ireland
Ulster Bank (Northern Ireland) Northern Ireland
Bank of Scotland Scotland
DSL Business Finance Scotland
Let’s Do Business Group South East
South West Investment Group (SWIG) South West
Robert Owen Community Banking Wales
ART Business Loans West Midlands
BCRS Business Loans West Midlands
Coventry & Warwickshire Reinvestment Trust West Midlands
Business Enterprise Fund Yorkshire & Humber
Chamber Acorn Fund (Humber) Yorkshire & Humber
Finance for Enterprises Yorkshire & Humber

 

CLBILS – Accredited Lenders

Barclays
Bank of Scotland
Danske Bank (Northern Ireland)
HSBC
Lloyds Bank
Natwest
Royal Bank of Scotland
Santander
Ulster Bank (Northern Ireland)
Virgin Money/CYBG

 

Related team

Tom Cox

Tom Cox

  • Partner
  • Debt Advisory
  • London