Coronavirus Business Interruption Loan Scheme; the reality so far

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15 April, 2020

Last month the Government announced the Coronavirus Business Interruption Loan Scheme (CBILS), with the aim of supporting SMEs who are experiencing lost or deferred revenues, leading to disruptions to their cashflow due to the Coronavirus pandemic. CBILS provides access to loans, overdrafts, invoice finance and asset finance of up to £5m and for up to six years.

The announcement was extremely well received however it seems that to date only a small percentage of SMEs hard hit by the pandemic have been successful in their applications for access to CBILS;

  • The British Chambers of Commerce has reported that only 1% of firms responding to its survey had managed to secure a loan under CBILS;
  • It has emerged that only around 4,500 loans, representing £800 million of financing, have been paid out under CBILS, despite the reported numbers of applications being around 300,000.

Initially CBILS came under scrutiny as failing to fall into line with government and public expectations, in particular with the requirement for onerous security such as personal guarantees and with bank's applying vigorous application hurdles, such as applicants having to prove a commercial case for the financing aside from struggles as a result of the pandemic. It has since been clarified that personal security will not be required and that assistance can be sought solely as a reaction to the pandemic, but even now are the banking institutions acting quickly enough for CBILS to fulfil its intention of aiding cash flow of those businesses hardest hit by the pandemic?

If social distancing measures do continue for the projected 12-week period and beyond, then economists are predicting the economy to shrink by a third and for unemployment to increase by 2 million. It seems to have been acknowledged by the government that improvements are required and that institutions are being urged to expedite applications where possible, recently admitting that just 1.4% of businesses that enquired about CBILS have so far been successful.

but what practical steps are being taken to ensure this is the case?

  • Rishi Sunak, Chancellor, has reacted to criticism of slow progress by recruiting former Bank of England adviser Richard Sharp as a consultant with a brief to speed up the processing of rescue loans and improving he performance of CBILS.
  • Further lenders have received accreditation under CBILS; most recently The Co-operative Bank, Cynergy Bank, OakNorth Bank and Starling Bank.
  • Sunak also expects to finalise plans for an extension of CBILS to include businesses with a turnover above £500m, including doubling the interest-free sums available to businesses to £50m.

Alok Sharma, Business Secretary, has announced that he has spent the last couple of days talking directly to some of the largest lenders who are part of CBILS and has been very clear to say to them that the money needs to go out of the door as soon as possible.

Will these measures be the solution required to ensure more businesses are able to access CBILS quickly enough to save their businesses, only time will tell, however we will continue to update you of progress as we discover more.

At Forbes Solicitors we are well versed in reviewing and advising on banking documentation and together with our property colleagues (where relevant) we can act quickly and ensure that there are no further delays at the legal stage of the finance if you are thinking of making an application under CBILS. For further information or if your business is struggling and you require advice and guidance please don't hesitate to contact Jenny Burke, Associate in the Corporate team at Forbes Solicitors, by emailing Jenny Burke or telephoning 07976247777.

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