What do you need to know about the new CBIL scheme?

The Coronavirus Business Interruption Loan Scheme (CBIL) is a new scheme announced by The Chancellor to help UK businesses that may be experiencing loss of revenue due to the coronavirus pandemic. 

The government will work with participating lenders to provide a government-backed partial guarantee (80%) across a range of products such as loans, overdrafts and finance. This means the government will repay any outstanding amount on a loan up to 80%, if a business defaults on payment. 

Lenders will be lending against earnings before interest, tax, depreciation and amortization (EBITDA) so, if a business had a negative EBITDA last year they would be unlikely to be able to get a loan. 

The scheme essentially means a lender who might have previously said ‘no’ to a credit decision because of availability of security may very well now say ‘yes’. 

The government will cover the first 12 months of interest and fees, meaning businesses won’t have to worry about finding money to cover fees and will have time to get back up and running before beginning repayment. 

With a maximum value of up to £5m, available on repayment terms of up to six years, the scheme really does give businesses a lifeline if they need to take out a loan to cover temporary loss of revenue or business interruption. However, loans are limited to a maximum of 25% of last year’s turnover or double the business’s annual wage bill, whichever is greater. 

Am I eligible for the CBIL scheme? 

UK-based businesses with an annual turnover of £45m or less are eligible. The business must have a strong borrowing proposal, and should be able to demonstrate that the provision of finance will help the business survive the temporary challenges the coronavirus pandemic has brought about. 

What are the terms of the loan?

Borrowers are still liable for 100% of the debt. 

Loans of…

  • £25k – £100k will be covered by a personal guarantee, meaning an individual must be personally responsible if the business cannot repay the debt. 
  • £100k – £250k will be secured by a personal guarantee and debenture (which gives lenders a charge over a borrower’s assets). 
  • £250k+ will be secured by a personal guarantee, debenture and tangible security. This means the loan will be backed by property backed, but not the borrower’s primary residential property. 

For a list of lenders in the scheme, visit this website. If you would like more information about the scheme, the UK Finance website has plenty of useful advice too. 

If you’re looking for up to date coronavirus news and updates, visit our resources page

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