United Kingdom | Publication | May 2020
UK: Bounce Back Loan Scheme (BBLS)/Coronavirus Business Interruption Loan Scheme (CBILS)/ Coronavirus Large Business Interruption Loan Scheme (CLBILS) – A Comparative Table of Key Features for Borrowers
In response to the COVID-19 pandemic, the UK government has introduced a series of schemes to assist UK businesses that are experiencing lost or deferred revenues, leading to disruptions to their cash flow as a direct result of the coronavirus (COVID-19) outbreak.
In this briefing, we set out in table form, the different requirements under three such schemes, namely: the Bounce Back Loan Scheme (BBLS), the Coronavirus Business Interruption Loan Scheme (CBILS) and, the Coronavirus Large Business Interruption Loan Scheme (CLBILS).
| Bounce Bank Loan Scheme (BBLS) | Coronavirus Business Interruption Loan Scheme (CBILS) | Coronavirus Large Business Interruption Loan Scheme (CLBILS) | |
|---|---|---|---|
| Scheme Start Date and Duration |
Start date May 4, 2020 Duration: initially until November 2020 (government retains option to extend) |
Start date March 23, 2020 Duration: initially until September 2020 (government retains option to extend) |
Start date April 20, 2020 Duration: initially until November 2020 (government retains option to extend) |
| What sort of businesses can apply | UK-based SMEs, micro businesses and other businesses requiring smaller loans |
Smaller UK-based businesses with a turnover of less than £45 million CBILS is open to:
|
Larger UK businesses with a turnover of more than £45 million CLBILS is open to:
|
| Total size of potential funding |
Term loan minimum £2,000 and up to the 25% of turnover The maximum loan amount is £50,000 |
(a) For term loans and overdrafts minimum will be £50,001 (b) For asset or invoice finance facilities only lenders will still be able to provide finance at less than £50,001 The maximum facility amount is £5 million |
(a) Up to £25 million for borrowers with a group turnover of up to £250 million; or (b) up to initially £50 million – increased May 26 to up to £200 million for borrowers with a group turnover greater than £250 million In each case the amount borrowed should not be greater than (i) double the borrower’s annual wage bill for the most recent year available, or (ii) 25% of the borrower’s total turnover for the most recent year available, or (iii) with appropriate justification and based on self-certification of the borrower, the amount may be increased to cover their liquidity needs for the next 12 months |
| How to Apply |
The BBLS scheme will be available through the British Business Bank’s accredited lenders (see “Accredited Lenders” below) Businesses will be required to fill in a short online application form and self-declare that they are eligible for the Scheme (see “Eligibility Criteria” below) |
The CBILS scheme will be available through the British Business Bank’s accredited lenders (see “Accredited Lenders” below) |
The CLBILS scheme will be available through the British Business Bank’s accredited lenders (see “Accredited Lenders” below) |
| Eligibility Criteria |
Potential borrowers must be able to self‑declare to the lender that:
The application form requires confirmations to be given in relation to losses that may be incurred, impact on credit rating, financial risk to personal assets (other than primary residence and primary personal vehicle), reduced consumer protection provisions, data protection consents and that lenders will not assess affordability Standard customer fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks will be undertaken by the lender and a lender may ask for additional information it requires such as recent tax returns |
To be eligible for a facility under CBILS, your business must:
Note that exporting businesses are in principle eligible. The test is the location of economic activity rather than where sales are made You must self-certify that your business has been adversely impacted by the coronavirus (COVID-19) The facility will be used primarily to support trading in the UK The Lender must: (a) consider the borrower’s proposal to be viable but for the COVID-19 outbreak; and (b) believe that the borrower will be able to trade out of any short to mid-term difficulties |
To be eligible for a facility under CLBILS, your business must:
The borrower must be able to self-certify that it has been adversely impacted by the coronavirus (COVID-19) and must have a borrowing proposal which the Lender (a) considers viable but for the COVID-19 outbreak; and (b) believes will enable the borrower to trade out of any short to mid-term difficulties The borrower must not have received a facility under the Bank of England’s Covid Corporate Financing Facility (CCFF) |
| Other State Aid impact |
You cannot apply if you are already claiming under:
If you have already received a loan of up to £50,000 under one of these schemes you can transfer it into the Bounce Back Loan scheme. You have until November 4, 2020 to arrange this with your lender If the business self-declares as not being a “business in difficulty” on December 31, 2019 (see “Eligibility Criteria” above), then any previous de minimis State aid does not impact a business’ eligibility for the Scheme Any aid received under the Retail, Hospitality and Leisure Grant and any Business Interruption Payment received under the Coronavirus Business Interruption Loan Scheme will count towards their total State aid allowance under the Temporary Framework. Businesses are required to self-declare that, since March 19, 2019, they have not received more than £711,200 in State aid under the State Aid Temporary Framework (or £106,680 in the case of fisheries and aquaculture businesses, or £88,900 for agriculture businesses) If the business self-declares as being a “business in difficulty” on December 31, 2019, then additional de minimis State aid restrictions apply |
Any previous de minimis state aid does not impact your eligibility for CBILS and the lender does not need to take it into account If receiving aid as a result of COVID-19 certain payments you receive under such aid (e.g. Temporary Framework for State Aid to support the economy in the current COVID-19 outbreak) may count towards the amount of Business Interruption Payment (BIP) – i.e. the payments the UK Government will make to cover interest and fees on your loan |
The eligibility criteria for CLBILS does not require Lenders to take into account the other forms of government support that businesses may be benefiting from e.g. the Coronavirus Job Retention Scheme, business rate reliefs or grants unrelated to the CBIL scheme The only exception to this is that companies may not utilise both CLBILS and the Bank of England’s CCFF facility for large investment grade companies |
| When is a “Business in Difficulty” |
A business is considered in difficulty if it met any one of the following criteria on December 31, 2019:
|
A business is considered in difficulty if it met any one of the following criteria on December 31, 2019:
* SMEs are defined as a business with less than 250 employees and either (a) a turnover of less than £44.45 million or (b) a balance sheet of less than £38.22 million These criteria do not apply to SMEs that, on December 31, 2019, had existed for less than three years. That means that certain fast-growth businesses may not be eligible for the scheme (unless they are less than three years old) |
|
| Borrower Viability Test | N/A |
Yes - the proposed borrower’s short-to-medium term viable business proposition is assessed according to a Lender’s normal commercial lending criteria The Lender may still lend under CBILS even if the proposed borrower’s viability is uncertain if in the Lender’s reasonable opinion (a) the finance will help the proposed borrower trade-out of any short-to-medium term cash flow difficulty, and (b) if the facility is granted, the proposed borrower is not expected to go out of business in the short-to-medium term For small value loans (e.g. those under £30,000) the credit worthiness of the proposed borrower may be determined based on a Lender’s normal unsecured credit score methodology and/or approval cut off (including any appeals process) applied prior to any changes to reflect coronavirus (COVID-19) impact |
The scheme is intended to include businesses where there are short-to-medium term performance issues due to adverse impacts of the coronavirus, but lending can only be agreed where a lender reasonably believes (a) the finance will help them trade out of any short-to-medium term cash flow difficulties, and (b) if the facility is granted, the borrower is not expected to go out of business in the short-to-medium term |
| Type of facilities available | Term loan only | Term loans, overdrafts, invoice finance & asset finance available | Term loans, overdrafts, invoice finance & asset finance available |
| Purpose |
The loan must be for business purposes The loan may be used to refinance other loans that the borrower has |
CBILS can be used to facilitate new lending and to a limited extent, to refinance existing debt (refinancing is generally limited to a maximum 20% of a Lender’s annual portfolio of CBILS supported lending) | CLBILS can be used to facilitate new lending and to a limited extent, to refinance existing debt (refinancing is generally limited to a maximum 20% of a Lender’s annual portfolio of CLBILS supported lending) |
| Maximum Term |
Fixed term of six years |
Term loans and asset finance facilities-up to six years Overdrafts and invoice finance facilities – up to three years Principal repayment holidays are at the discretion of the lender |
Three years |
| Fees and Interest –(i.e. Business Interruption Payments) |
No set-up fees payable by borrowers First 12 months of interest payments covered by government Interest fixed at 2.5% p.a. No fees for early repayment Note: Fisheries, agriculture and aquaculture businesses may not qualify for the full interest and fee payments by government |
Interest and fees are set by accredited lenders and will vary by lender First 12 months of interest and Lender-levied fees covered by government Note: Fisheries, agriculture and aquaculture businesses may not qualify for the full interest and fee payments by government |
No Business Interruption Payments will be made by government and lenders can apply commercial interest rates |
| Liability | Businesses remain 100% liable to repay the full loan amount at the end of the term, as well as interest, after the first year | Businesses remain 100% liable to repay the full loan amount at the end of the term, as well as interest, after the first year | Businesses remain 100% liable to repay interest and the full loan amount at the end of the term |
| Security |
Borrower’s main home or primary personal vehicle cannot be taken as security For sole traders or partnerships, who do not have the benefit of limited liability, other personal assets may be at risk of recovery action |
At the discretion of the Lender save in respect to personal guarantees (se “Personal Guarantees” below) Unsecured facilities of up to £250,000 For facilities above £250,000, the Lender must establish that the borrower is unable to provide security before making a loan under the CBILS The primary residential property is not to be taken as security for any CBILS facility |
Lenders may follow their normal credit policies when requiring security |
| Personal Guarantees |
Lenders are not permitted to take personal guarantees |
No personal guarantees for any facilities below £250,000 Personal guarantees may still be required for facilities above £250,000 |
No personal guarantees for any facilities below £250,000 Personal guarantees may still be required for facilities above £250,000. However, claims on personal guarantees cannot exceed 20% of losses after all other recoveries have been applied |
| Restrictive Covenants to be inserted into facility agreement | N/A | N/A |
Under the terms of the CLBILS facility certain restrictive covenants must include:
|
| Government Guarantee | The accredited Lender will have the benefit of a government-backed, full guarantee (100%) against the outstanding guarantee facility balance (both principal and interest) | The accredited Lender will have the benefit of a government-backed, partial guarantee (80%) against the outstanding guarantee facility balance (only principal) | The accredited Lender will have the benefit of a government-backed, partial guarantee (80%) |
|
Restricted Sectors Businesses which are not eligible to apply for financing under a scheme |
Banks and building societies Insurers and reinsurers Public sector organisations State funded primary and secondary schools An individual other than a sole trader or a partner acting on behalf of a partnership |
Banks and building societies Insurers and reinsurers Public sector organisations |
Banks and Building Societies Insurers and reinsurers Public sector organisations State funded primary and secondary schools Further-education establishments, if they are grant-funded |
| Accredited Lenders can be located at: | https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/current-accredited-lenders-and-partners/ | https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/current-accredited-lenders-and-partners/ | https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/clbils/current-accredited-lenders-and-partners-2/ |
| Borrower’s Legal Protection |
The provisions of the Consumer Credit Act which require lenders to provide sole traders, small partnerships and unincorporated associations seeking finance up to £25,000 with information before a loan is granted, and to provide further information throughout the course of the agreement do not apply under the BBLS However, lenders will still be required to provide relevant information to businesses and the collection of the BBLS loans will be regulated, meaning that, should businesses encounter financial difficulty, lenders will have to comply with relevant regulations Borrowers are advised that they should seek independent legal advice if they are in any doubt about the consequences of the loan agreement not being regulated by the Financial Services and Markets Act 2000 or the Consumer Credit Act 1974 or any other aspect of taking out a loan |
All existing statutory rights (for example, Consumer Credit Act and FCA protections) apply |
The outline above is a summary of the requirements under each of the BBLS, CBILS and the CLBILS.
At Norton Rose Fulbright, we have extensive experience in helping clients navigate the complex legal and structuring issues that can arise in these areas. Please speak to your usual Norton Rose Fulbright contact if you would like to discuss any of the issues raised in this briefing in further detail.
Detailed information of the Schemes can be found on the British Business Bank website: https://www.british-business-bank.co.uk/
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