26th May, 2020 by Ian Ilersic
The Coronavirus Business Interruption Loan Scheme (CBILS) went live on 23 March with the aim of supporting businesses with an annual turnover of up to £45 million to access funding. If your business has a turnover of up to £45 million, see our separate article on CBILS here.
At the same time as CBILS was launched, the Covid Corporate Financing Facility (CCFF), was set up for large companies with investment grade credit ratings to issue commercial paper which the Bank of England will buy for up to 12 months.
This left a significant gap in support for businesses with a turnover over £45 million and without an investment grade credit rating.
Details of the Coronavirus Large Business Interruption Loan Scheme (CLBILS) have now been announced in order to plug the gap.
CLBILS went live on 20 April.
All viable business with a turnover of more than £45 million will be able to apply for up to £200 million of finance. This represents a change (as from 26 May) from the original scheme which permitted business with a turnover above £45 million to apply for £25 million of finance, and up to £50 million for firms with a turnover in excess of £250 million.
For facilities in excess of £50 million, there are additional eligibility criteria, namely restrictions on paying bonuses to senior management and restrictions on paying dividends.
As with CBILS, CLBILS will be deployed through a number of lenders accredited by the British Business Bank (BBB), which are listed on the BBB website.
The key features of CLBILS are very similar to the CBILS scheme for smaller businesses:
Lending under CLBILS must not be subordinated to any other senior debt obligations, subject to carve-outs for asset finance and invoice finance. The stated intention of the government in adopting this position is the protection of taxpayer interests.
Government has confirmed that the amount of funding available under CLBILS will be demand-led so funds will not run out. There is no immediate need to approach a lender if you do not need finance in the short term.
Businesses from most sectors can apply for the full amount of the facility. The following businesses and organisations are not eligible: credit institutions (falling within the remit of the Bank Recovery and Resolution Directive), building societies, insurers and reinsurers (but not insurance brokers), public-sector bodies, further-education establishments if they are grant-funded, state-funded primary and secondary schools.
To be eligible for a facility under CLBILS, a business must:
Lenders and borrowers are still free to enter into loan agreements outside of CLBILS. The scheme is intended to support businesses experiencing short to medium term difficulties due to the impact of coronavirus in circumstances where the lender reasonably believes that the finance will help the business to trade out of its cashflow difficulties and survive in the short to medium term.
If a business which is investment grade has participated in the CCFF scheme, it ceases to be eligible for CLBILS. Other types of aid do not impact CLBILS eligibility so businesses can still take advantage of other support such as the Coronavirus Job Retention Scheme, business rate reliefs or grants unrelated to the CLBILS scheme.
There will not be many sole traders meeting the threshold turnover for CLBILS, but sole traders and freelancers are eligible as long as the business activity is operated through a business account. The scheme is open to sole traders, freelancers, corporates, limited partnerships, limited liability partnerships and other legal entities carrying out a business activity in the United Kingdom, with a turnover of over £45m. The business must generate more than 50% of its turnover from trading activity.
If a business has previously had de minimis state aid, it does not impact eligibility for CLBILS and does not need to be taken into account by the Lender. De minimis state aid is state aid of up to €200,000 in total during the current and previous two fiscal years. If a business has received state aid above that threshold, it may impact CLBILS eligibility.
There has been some delate about whether private equity backed businesses would be eligible, with PE firms uncertain as to whether the £50 million maximum loan amount would be applied across their entire portfolio of investee companies. It is now clear that PE backed businesses can apply for loans under CLBILS on a standalone basis.
CLBILS is available through BBB’s 40+ accredited lenders. These are listed on the BBB website. These lenders range from high-street banks, to challenger banks, asset-based lenders and smaller specialist local lenders.
In the first instance, businesses should approach their own provider – ideally via the lender’s website. Telephone lines are likely to be busy and branches may have limited capacity to handle enquires due to social distancing.
In assessing applications for CLBILS loans, lenders are typically requesting management accounts, cash flow forecasts, business plan, historic accounts and details of assets. The requirements vary by lender so if you do not have everything mentioned, do not be put off from speaking to your lender if you need additional funding.
Decision-making on whether businesses are eligible for CLBILS is fully delegated to the accredited CLBILS lenders.
In the event that a lender turns down a CLBILS proposal, you can still approach other lenders within the scheme.
BBB asks that any questions are directed by businesses to their current providers, not BBB directly. The BBB website contains a links to an FAQ page which answers many of the more common questions:
If you have any queries regarding business funding (under CLBILS, CBILS or otherwise) please do not hesitate to contact one of our team.
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