Key eligibility criteria for the schemes include:
The British Business Bank operates the schemes via its accredited lenders. There are over 40 of these lenders currently working to provide finance and they include high-street banks, challenger banks, asset-based lenders and smaller specialist local lenders.
Spectrum is aware of non-accredited lenders that are currently considering accessing the scheme to support clients and thus we encourage businesses to check the current list on the British Business Bank website regularly.
Firms backed by private equity are able to be supported through both CBILS and CLBILS on a standalone basis.
Coronavirus Business Interruption Loan Scheme ("CBILS")
- A lender can provide up to £5m in the form of term debt facilities, asset finance loans, invoice discounting or an overdraft facility (committed or uncommitted). The scheme provides the lender (not the borrower) with a government-backed partial guarantee against 80% of the outstanding facility balance (net of any recoveries).
- Term debt facilities and asset finance loans must be structured with a maximum tenor of 6 years, whilst invoice discounting and overdraft arrangements can be up to 3 years.
- The government will charge no arrangement fee itself and cover total interest in full for the first 12 months as well as any lender-levied fees (i.e. arrangement fees). Facilities will be offered at commercial rates of interest, albeit lenders must demonstrate that their pricing takes into account the economic benefit provided by the government-backed partial guarantee.
- The amount borrowed should not be greater than (i) double the borrower’s annual wage bill for the most recent year available, or (ii) 25% of the borrower’s total turnover for the most recent year available, or (iii) with appropriate justification and based on self-certification of the borrower, the amount may be increased to cover their liquidity needs for the next 18 months for SMEs (defined has having up to 250 employees) or the next 12 months for larger enterprises (with over 250 employees).
- CBILS is primarily designed to be used to facilitate new lending, although can be used to a limited extent to refinance existing debt.
Whilst not always the case, Spectrum understands from discussions with accredited lenders that certain other fees may be waived when agreeing the scheme e.g. early repayment fees.
- Borrowers must be UK based and generate more than 50% of turnover from trading activities. A maximum turnover cap exists set at £45m for the most recent period and the CBILS-backed facility must be used to support trading primarily in the UK. Businesses in most sectors are eligible to use the scheme, however, several excluded sectors do exist.
Notable restricted sectors include: Insurers and reinsurers (but not insurance brokers), public-sector organisations, including state-funded primary and secondary schools, membership organisations (Employer, professional, religious or political) and trade unions. See the British Business Bank website for the most current sector exclusion guidance.
- At the discretion of the lender, the scheme may be used for unsecured lending for facilities up to £250,000. In such circumstances the lender is prohibited from requesting a personal guarantee from the applicant.
- For facilities above £250,000, the lender must establish that the borrower is unable to provide security, before it uses CBILS. Personal guarantees may be requested, however these will be capped at 20% of the outstanding value of the loan, as the government is providing the guarantee for the remaining 80% of the finance. Primary residential property cannot be taken as security under the scheme at any time.
- Accredited lenders are required to attest that they would consider the lending proposal viable, were it not for the COVID-19 pandemic, and believe facilities will enable the business to trade out of any short-term to medium-term difficulty. Borrowers
must not have exhausted state aid limits.
- Businesses can use other schemes alongside CBILS.
Coronavirus Large Business Interruption Loan Scheme ("CLBILS")
Following demand to strengthen business support to the UK
mid-market, the government has launched CLBILS which is available to businesses
with an annual turnover over £45m, and is accessible under broadly the same
framework as set out above for CBILS. A lender can provide financial support in
the form of term debt facilities, asset finance loans, invoice discounting or a
revolving credit facility (committed or uncommitted). The scheme provides the
lender (not the borrower) with a government-backed partial guarantee against
80% of the outstanding facility balance (net of any recoveries).
Full guidance on CLBILS can be found at
the British Business Bank website, however the key differences between the
- Businesses with annual turnover between £45m and £250m can access up to £25m in financial support; and those with annual turnover over £250m can apply for up to £200m.
- The maximum repayment term for any facility is 3 years.
- If a lender can offer finance on normal commercial terms without making use of the scheme, it will do so.
- The borrower will be liable for any interest from the outset as well as any lender-levied fees (i.e. arrangement fees), whereas interest for the first 12 months and fees are paid by the government under the CBILS scheme.
- Any facility provided must benefit from (at least) the same security package when compared to existing borrowing facilities.
- The borrower must not have received a facility under the Bank of England’s COVID-19 Corporate Financing Facility (CCFF).
Spectrum CBILS & CLBILS Support
Lenders, both accredited and non-accredited, are receiving a high volume of enquiries relating to accessing funding support and most have formulated house strategies in response to the rapid rise in funding needs. Businesses are able to access funds by approaching lenders directly and can find detailed information including frequently asked questions here.
To further assist in accessing funding our Debt Advisory team can work with you to secure the additional capital needed to navigate your business through this period.
Services provided include:
- Navigating the lending landscape: Whilst all applications incorporate the common eligibility criteria as set out by the British Business Bank they can vary in terms of borrower information requirements, standardised facility terms and security requested. The Spectrum team can leverage its deep relationships and knowledge of the banking industry to provide clarity on how to best approach a lender.
- Presenting your business to lenders: We can work with you to prepare a detailed, comprehensive and professional loan application, positioning your business to meet a lender’s approval requirements. Our team is highly experienced when advising clients on how to approach lenders both in terms of communicating strategies and producing high quality supporting materials, including detailed financing modelling.
- Negotiating terms and security: Ensuring the agreed facility provides the flexibility for your business to manage through this time is pivotal. We can play a leading role in delivering a facility agreement that best suits your needs, covering bespoke repayment plans, security arrangements and lender controls.
- Full process management: One of our key objectives is to allow business owners to prioritise and focus their time on managing their business through the crisis as well as assisting lenders in a timely and efficient review of the proposal.
For more information please contact a member of the Spectrum Debt Advisory team, alternatively email CBILS@spectrumcf.co.uk and we will be in contact to arrange a convenient time to discuss your particular circumstances.