Finance
April 22, 2020

FAQs - Coronavirus Business Interruption Loan

By Lawbite Team

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:

Find an approved lender.
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
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 www.lawbite.co.uk. 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: https://www.gov.uk/government/news/coronavirus-covid-19-guidance-for-employees-employers-and-businesses 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.

Read more of our latest blog posts, featuring all the latest legal news, analysis and opinion from our expert lawyers.

By Lawbite Team
December 22, 2020

Redundancies in the age of COVID - Pitfalls and how to avoid them

In December 2020, the UK Furlough Scheme enacted in response to the Covid 19 Pandemic, was extended until the end of April 2021. A key aspect of th...

Coronavirus

By Lawbite Team
December 08, 2020

How Can Commercial Landlords Deal with Rent Arrears in the Era of Covid?

Many SMEs are a tenant, but a good number also are a commercial property landlord. On both sides of the commercial property lease equation, times ...

Coronavirus

By Lawbite Team
November 18, 2020

Is a personal guarantee weighing heavy?

Structuring your business as a limited company limits your personal liability and financial obligations, in relation to your business related debts...

Finance

LawBite can help you

LawBite is on a mission to provide business legal advice that is easier to access, clearer to understand and much cheaper. Our on-line legal advice platform can quickly connect you with expert business legal advice. Our friendly, highly qualified business lawyers, solicitors and mediators will give you the guidance and reassurance that comes from customised legal advice for small and medium sized business.

Whether you are bringing or defending a legal claim, outsourcing work, want a business contract review to ward off disagreements, talk to an expert trademark lawyer, resolve a contractual dispute with methods like mediation and arbitration, or getting your new company set up and on the right footing with a robust shareholder agreement and GDPR standards, we can help you succeed.

Talk to a Lawyer

Book a Call