The Coronavirus Business Interruption Loan Scheme (CBILS) is a loan scheme that was announced by the Chancellor, Rishi Sunak, during the 2020 Budget and has been set up to help small and medium-sized enterprises (SMEs) that are struggling with cash flow because of revenues that have been deferred or lost due to the coronavirus (COVID-19) pandemic outbreak. The loans are being offered on generous terms to support SMEs.

The Chancellor pledged to give interest-free loans of between £1,000 up to £5 million to companies with revenue of less than £45 million to help them weather the coronavirus outbreak, with the Government guaranteeing banks up to 80% of the value of what was borrowed.

Cash flow disruption
The CBILS provides financial support to smaller businesses across the UK that are losing revenue, in particular for businesses which have or will have their cash flow disrupted by lost or late income as a result of the COVID-19 outbreak.

Package of government support
The scheme is a part of a wider package of government support for UK businesses and employees. The British Business Bank operates the CBILS via its accredited lenders. Finance terms are up to six years for loans and asset finance facilities.

For overdrafts and invoice finance facilities, terms are up to three years. Interest and fees for the loans will be paid by the Government for the first 12 months.

There are over 40 lenders currently working to provide finance. They include:

High-street banks
Challenger banks
Asset-based lenders
Smaller specialist local lenders

A lender can provide up to £5 million in the form of:

Term loans
Overdrafts
Invoice finance
Asset finance

To be eligible to apply through this CBILS, your business must:

Be based in the UK
Have an annual turnover of no more than £45 million

To be eligible to get finance through this scheme, your lender must:
Confirm that, based on your proposal, if it were not for the coronavirus disruption, you’d have a viable business that meets the lender’s normal lending requirements

Believe that with the finance you get from the CBILS, you’ll be able to stay in business and continue trading in the short or medium term

Government-backed guarantee
If you’re not sure if your lender would decide you’re eligible, you can apply anyway. If a lender can offer finance on their normal terms without the CBILS, they will.

CBILS gives the lender a government-backed guarantee for the loan repayments to encourage more lending. The borrower still remains fully liable for the debt, but the big four banks have agreed that they will not take personal guarantees as security for lending below £250,000 under CBILS.

Generally, lenders have a strict set of criteria they use to decide whether to offer credit to businesses. In this coronavirus emergency situation, the Government wants to help small businesses so they’re giving selected lenders a guarantee on 80% of the money they lend, up to an overall cap per lender.

As the borrower, your business is still 100% liable for the debt, it’s just that the Government is helping to turn your lenders no into a yes.