The Coronavirus Business Interruption Loan Scheme will temporarily replace the Enterprise Finance Guarantee Scheme.

A new temporary Coronavirus Business Interruption Loan Scheme (CBILS) to be delivered by the British Business Bank will launch by the start of next week to support businesses to access bank lending and overdrafts.

The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The first 6 months of that finance will be interest free as the government will cover the first 6 months of interest payments.

The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value. This new guarantee will initially support up to £1 billion of lending on top of current support offered through the British Business Bank.

The British Business Bank’s CBILS will temporarily replace the Enterprise Finance Guarantee (EFG). The new scheme will operate in a similar way to EFG, but it will offer more attractive terms for both businesses and lenders, with the aim of supporting the continued provision of finance to UK businesses during the Covid-19 outbreak.

As well as loans, there will be many other types of finance supported by the programme, depending on the provider:

• Term facilities
• Overdrafts
• Invoice finance facilities
• Asset finance facilities

The CBILS will facilitate business finance to smaller businesses that are viable but unable to obtain finance due to having insufficient security to meet the lender’s normal requirements. The borrower always remains 100% liable for the debt. The CBILS will provide the lender with a government-backed 80% guarantee against the outstanding facility balance, potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’.

To be eligible for CBILS, a business must:

• be UK based, with turnover of no more than £41 million per annum
• operate within an eligible industrial sector (a small number of industrial sectors are not eligible for support – see here)
• have a sound borrowing proposal, but insufficient security to meet a lender’s normal requirements
• be able to confirm that they have not received de minimis State aid beyond  €200,000 equivalent over the current and previous two fiscal years

An accredited lender can use CBILS to help a borrower access from £1,000 to £5 million. Finance terms will be from three months up to ten years for term loans and asset finance and up to three years for revolving facilities and invoice finance.

To apply for an CBILS-backed facility, businesses may consider approaching one or more participating lenders to discuss their borrowing needs.

Almost all business sectors are eligible, however there are a small number of excluded/restricted sectors arising primarily from EU de minimis – state aid – rules.

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