One of the measures outlined in the Government post budget Coronavirus briefings on 17 March 2020 was the Coronavirus Business Interruption Loan Scheme (“CBILS”).
Whilst the details will not be ready until Monday, as government interacts with the Lenders, this is in effect a rehashing of the Enterprise Finance Guarantee Scheme (“EFG”) launched after the 2008 banking crisis. The main differences being an increase in guarantees from the government to the Lender from 70% to 80% and the increases in quantum from £1m to £5m. The Lenders include all the high street banks plus a range of other ones, see attached link. https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/accredited-lenders/
Unless the CBILS criteria are relaxed, compared to the EFG scheme, which we should know on Monday, the main question for the Lender would be whether the client is a “good business” that could service the loan repayments. If it could but the Lender could not support due to lack of tangible security, then the government guarantee is there to support the Lender in order to de-risk that lack of security.
As was the case with the EFG scheme, it was initially launched in haste and the application of the scheme was left to the interpretation of the various Lenders meaning take-up was low. The lack of initial usage meant that the government expanded the lending panel so that now there are various challenger banks and asset-based lenders operating the scheme.
We suspect that the banks will focus on their existing clients and therefore they should be the first port of call, but it does mean that there are alternatives this time if the incumbent lender cannot help.
Patrick Abel
Corporate Finance Partner
Hart Shaw LLP
19 March 2020
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