Coronavirus Business Interruption Loan Scheme (CBILS)

 

Amongst the extent of measures that the Government have recently introduced in order to try and combat the financial impact of the Coronavirus is the Coronavirus Business Interruption Loan Scheme (CBILS) which is focused at Small to Medium sized businesses (SMEs) in the UK.

The Scheme is available to businesses with turnovers up to a maximum of £45m with at least 50% of the turnover of that business taking the form of trading activity. The Scheme is designed to support SME’s by aiding cash flow.

Jonathan Aldersley, Partner and Business Law specialist explains how the Scheme will work.

How the Scheme works

The Government Scheme is operated via accredited lenders including High Street Banks, Challenger Banks, Asset Based lenders and smaller specialist local lenders.

A Lender is able to provide up to a maximum of £5m in the form of:-

• Term loans
• Overdrafts
• Invoice finance
• Asset finance

The Lender is able to rely upon a Government backed guarantee for the loan repayments and this is designed to encourage more lending to those SMEs in need.  However, it is worth stressing that Borrowers remain fully liable for the debt and it would only be in the event of default that the Lender would be able to utilise the Government backed guarantee.

For term loans and asset finance facilities the terms are available for up to 6 years.  For overdrafts and invoice finance facilities these are up to a maximum of 3 years.

Security

Lenders are being encouraged to offer finance on normal commercial terms without making use of the Scheme, however, if they have to use the Scheme then unsecured lending is available up to £250,000.  For facilities above £250,000 the Lender has to establish that the borrower is unable to provide security before it can use the CBILS.  One important exemption from security is primary residential property.

Accordingly, careful consideration needs to be given as to the level of funding required for a business and the security risk that the owners of the business are prepared to take.

How can we help?

At Butcher & Barlow we are able to advise in relation to security documentation and business re-structuring and for those facilities in excess of £250,000 it is likely to be a requirement of any Lender that independent legal advice is obtained.

We remain fully operational (save that we are undertaking remote working) but can make use of video conferencing and telephone conferences in order to provide the advice on the documentation.

If you would like any further information or require assistance in dealing with any application that has been approved please contact Jonathan Aldersley on 07793 953539 or Justin Kelly on 07760 629181, alternatively, please feel free to send an e-mail to:  jaldersley@butcher-barlow.co.uk or jkelly@butcher-barlow.co.uk

To view Butcher & Barlow’s own working practices, please visit www.butcher-barlow.co.uk/news.