The Coronavirus Business Interruption Loan Scheme (CBILS), unveiled by the Chancellor of the Exchequer earlier this month, has opened for applications from small businesses today. 

The CBILS supports a wide range of business finance products, including invoice finance and asset finance facilities as well as term loans and overdrafts. 

SMEs experiencing lost or deferred revenues, leading to disruptions to their cashflow are eligible for £5m in funding, available on repayment terms of up to six years, according to a press release. 

Delivered by the British Business Bank (BBB), through 40-plus accredited lenders and partners, the CBILS will support the continued provision of finance to SMEs during the Covid-19 outbreak, the BBB said in a statement. 

Although the Budget announced that an initial £1.2bn of government-backed lending would be available through the new scheme, the government has since announced that it will be demand-led and will be resourced accordingly.

The scheme provides the lender with a government-backed guarantee, potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’.

During the budget 2020 announcement, the chancellor said the scheme would provide the lender with an 80% government-backed guarantee, against the outstanding facility balance, subject to an overall cap per lender. 

The BBB said that no fee would be levied on SMEs, although lenders would pay a fee to access the scheme. 

It was also announced that the government would make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees so smaller businesses will benefit from no upfront costs and lower initial payments. 

Finance terms are up to six years for term loans and asset financing. For overdrafts and invoice financing, terms will be up to three years.

The BBB said that at the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under. For facilities above £250,000, the lender must establish a lack or absence of security prior to businesses using CBILS. 

If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so, the BBB added. 

Liability for the debt remains entirely with the borrower, the BBB stated.

Eligibility criteria

Only UK-based business (with their business activity in the UK), with a yearly turnover of £45m, are eligible for the scheme.

SMEs will need to show that they have a borrowing proposal which, were it not for the current pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty.

If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.

Keith Morgan, chief executive of the British Business Bank, said: “In this period of exceptional hardship for smaller businesses across the UK, it has been vitally important to get this new scheme up and running as soon as possible. 

“Available from today, we hope this new scheme will enable lenders to provide the finance smaller UK businesses need, alongside other government measures, to help them survive the current economic disruption.”

Rishi Sunak, the Chancellor of the Exchequer, said: “We are working round the clock to do whatever it takes to protect our people and businesses.

“That means that we are not only taking unprecedented action but doing so at unprecedented speed because we know that businesses and their employees need help now.”

Alok Sharma, the business secretary, said: “We know that businesses are in urgent need of access to funding during these unprecedented times.

“The CBILS will make it easier for banks to lend and businesses to borrow. This will ensure that credit keeps flowing to where it is needed, when it is needed.”

Stephen Jones, chief executive of UK Finance, said: “The banking and finance sector is committed and has the capacity to support viable businesses with their cash flow and investment needs.

“The CBIL Scheme is an important additional solution to the support banks and finance providers are offering SMEs to help them through the cashflow pressures they may increasingly experience during this unprecedented period. 

“Lenders who are accredited to offer finance under the scheme are moving as quickly as possible to provide this support which will be available through customers’ usual contacts.        

“Many lenders have online channels which customers can use to access the scheme. Businesses don’t need to worry about the support running out as this will be available on an on-going basis for those eligible businesses that need it.”