In response to the coronavirus and its economic effects, the government has offered a range of financial assistance schemes for UK businesses.
One of these is the Coronavirus Business Interruption Loan Scheme, or CBILS, which provides financial support to small and medium-sized UK-based businesses that have been affected by the coronavirus and its effects on the economy.
Under the Business Interruption Loan Scheme, qualifying businesses can apply for loans and finance of up to £5 million, with the government guaranteeing 80 per cent of the finance to the lender and covering all interest and fees during the first 12 months of the loan.
Although not all businesses are eligible for the Business Interruption Loan Scheme, for those that are, the scheme can be an important financial lifeline.
If your business has used the Business Interruption Loan Scheme and now cannot pay back its balance, it’s important to talk to a professional to learn more about the options that are available to protect your company.
Below, we’ve provided more information about the Business Interruption Loan Scheme (CBILS), as well as what you should do if your business has received financing through the scheme and is now under financial pressure.
What is the Coronavirus Business Interruption Loan Scheme (CBILS)?
The Coronavirus Business Interruption Loan Scheme, or CBILS, is one of several new financial schemes provided by the government to help UK-based businesses that have been affected by the coronavirus.
The scheme involves more than 50 lenders throughout the UK, including all of the country’s top retail banks, making it relatively simple to apply for a loan or financing facility using the CBILS if your business is eligible for the scheme.
Small and medium-sized UK-based businesses can apply for the CBILS as long as they meet certain conditions. To be eligible, your business needs to:
- Be based in the United Kingdom
- Have an annual turnover of £45 million or less
You will also need to prove to the government that:
- The coronavirus and its response has negatively impacted your business
- Your business would be financially viable if it weren’t for the coronavirus
- For loans of £30,000 or greater, that your business wasn’t considered a business in difficulty as of the 31st of December, 2019
Loans and financing provided under the Coronavirus Business Interruption Loan Scheme last for several years. Overdrafts and invoice financing facilities are available for up to three years, while loans and asset financing facilities are available for up to six years.
The scheme is available to all UK businesses that meet the above criteria, with the exception of businesses in the following sectors:
- Insurers and reinsurers
- State-funded schools
- Public sector bodies
How Much Can a Business Borrow Via the CBILS?
Businesses can access financing facilities and loans of up to £5 million using the Coronavirus Business Interruption Loan Scheme (CBILS). Of this amount, 80 per cent is guaranteed by the government, with interest and fees paid by the government during the first 12 months.
The amount that your business may be able to borrow can vary based on your account history, cash flow, assets and other factors.
In order to apply, you’ll need to contact a qualified lender and provide documentation. A full list of lenders can be found via the British Business Bank website.
Lenders may reject certain businesses for loans or financing under the Coronavirus Business Interruption Loan Scheme. If you own a business that’s eligible for assistance, you can apply through other lenders that are participating in the CBILS.
Alternatives to the Business Interruption Loan Scheme
If your business isn’t eligible for assistance under the Coronavirus Business Interruption Loan Scheme (CBILS), other financing options may be available. Alternatives to the CBILS include:
- Turnaround finance. If your business is experiencing cash flow issues but is financially viable in the long term, a turnaround loan or credit facility can help you to pay creditors and continue trading.
- Refinancing. If your business has valuable assets such as real estate or equipment, it may be able to use refinancing to free up cash. Alternatively, you may be able to make use of options such as invoice factoring or invoice discounting.
- Other government schemes. Small businesses may be able to access financing using the Business Bounce Back Loan scheme, while larger businesses may qualify for the Coronavirus Large Business Interruption Loan Scheme (CLBILS).
What if Your Business Can’t Pay Back the Business Interruption Loan Scheme?
If your business can’t afford to pay back its loan under the Coronavirus Business Interruption Loan Scheme (CBILS), it’s important that you seek expert help as soon as possible to protect both your business and your as a company director.
Although the government provides a guarantee for loan repayments, borrowers remain fully liable for any debts taken on under the Coronavirus Business Interruption Loan Scheme.
If your business becomes insolvent after receiving financing via the CBILS, your options may include:
- Proposing a CVA. Your company may be able to protect itself from legal action by its creditors via a Company Voluntary Arrangement (CVA). A successful CVA may allow your business to gradually repay its creditors in monthly instalments.
- Entering into administration. Your business may be able to enter into administration, allowing an insolvency practitioner to take over control of the company and work to recover the business.