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The British government announced on 16 April 2020 that it will extend the Coronavirus lockdown for at least another three weeks. This will come as a blow for many SMEs whose cashflows are already highly precarious.  But help is available. For SMEs, this comes in the form of being able to furlough their employees, the Coronavirus Business Interruption Loan Scheme (CBILS) and the recently announced support for Start-Ups. Below are answers to frequently asked questions about these schemes.

What is a Coronavirus Business Interruption Loan Scheme?

The CBILS was introduced on 22 March 2020 by the Chancellor of the Exchequer, Rishi Sunak, and revised on 2 April. It provides a government-backed loan for SMEs to access if they meet specific criteria. The British Business Bank administers it, with funds distributed through 40 approved lenders, including high street banks such as Barclays and HSBC. Finance of up to £5 million is available with repayment terms over six years. To encourage approved financial institutions to lend, the scheme provides the lender with a government-backed, partial guarantee against any outstanding balance.

Who is eligible?

The scheme is open to:
  • sole traders
  • freelancers
  • bodies corporate
  • limited partnerships
  • limited liability partnerships, and
  • any other legal entity carrying out business activity in the UK (provided they meet the qualifying criteria below)
To qualify for the scheme, your business must:
  • show its commercial activity is based in the UK
  • have an annual turnover no more than £45 million
  • proposal the lender would consider viable, were it not for Covid-19
  • self-certify that it has been adversely impacted by Covide-19

What types of finance are available?

The CBILS provides access to:
  • Term loans
  • Overdrafts
  • Asset finance
  • Invoice finance
However, not every approved lender can offer all types of funding.

How do I access the Coronavirus Business Interruption Loan Scheme?

To access the CBILS:
  1. Find an approved lender.
  2. Approach the lender. The best way is often through their website as phone lines are very busy and social distancing means it may be challenging to visit a bank
  3. Wait for a decision. The lender has the discretion to approve or decline your application.

Will I be asked to provide a personal guarantee?

No guarantee is required if you are applying for a loan of £250,000 or less. They can ask for a personal guarantee for loans above £250,000, but any guarantee excludes your principal private residence. Furthermore, recoveries under the guarantee are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied.

What supporting documents will I need to provide?

The documents required to apply under the CBILS are similar to that required for a normal business loan and can include:
  • company accounts
  • cash flow forecast
  • your business plan
  • historical accounts (normally three years’ worth)
  • an inventory of assets
Different lenders will ask for distinct documents; check application guidelines carefully.

Start-Up Support

On the 20th April 2020, the Government announced further support for innovative new companies ineligible for the Business Interruption Loan Scheme. Designed to help firms in some of the most dynamic sectors of the economy, including tech and life sciences, the loans will offer some respite to new and innovative businesses, often at the cutting edge of new technologies. 

Future Fund 

A new £500 million loan scheme for high-growth firms, a combination of £250m of Government funding matched by private investors. It is not yet clear how the funding match should be structured. Set to launch in May 2020 and run through to September 2020 the scheme will see the government invest between £125,000 and £5m to be used solely for working capital purposes. Any Future Fund investment shall automatically convert into equity on the company's next qualifying funding round at a discounted rate. The funding will mature after 3 years if not converted before, at which point the company have the option to repay accrued interest in cash (8%).

Innovate UK’s grants and loan scheme

£750 million of targeted support for the most research and development intensive small and medium size firms. Up to £200 million of grant and loan payments for Innovate UK’s 2,500 existing on an opt-in basis are available. An extra £550 million will also be made available to increase support for existing customers and support will be offered to firms not currently in receipt of Innovate UK funding. 

Am I eligible?

Further information around eligibility is still to be confirmed but the government have confirmed that to be eligible a business
  • must be an unlisted UK registered company
  • have previously raised at least £250,000 in equity investment from third party investors in the last five years.
  • any funding put in by the government must be matched by private investment in order to qualify
For more information see the Future Fund Headline Terms.

Further information

If you require any legal advice for business finance, please visit LawBite is an on-line platform that seamlessly connects businesses to expert legal help that is clearer and more affordable, usually 50% lower than from comparable services. We offer a 15 minute free consultation for business legal advice. LawBite continues to issue advice on the impact of Covid-19 on businesses. All information is correct as of 23 April 2020. Keep up to date with latest UK government guidance for businesses and employees at: Nothing in this article constitutes legal advice on which you should rely. The article is provided for general information purposes only. Professional legal advice should always be sought before taking any action relating to or relying on the content of this article. 

In closing

Nothing in this article constitutes legal advice on which you should rely. The article is provided for general information purposes only. Professional legal advice should always be sought before taking any action relating to or relying on the content of this article. Our Platform Terms of Use apply to this article.

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