Coronavirus Large Business Interruption Loan Scheme

Banks and other finance providers recognise that businesses’ cashflow may be disrupted by the impact of Covid-19. The banking and finance industry is committed to supporting viable businesses in continuing to trade through these uncertain times and lenders are well placed to help those looking for support.

The Coronavirus Large Business Interruption Loan Scheme (‘CLBIL scheme’) was launched on Monday 20th April 2020, enabling an alternative solution for those viable larger businesses with a turnover above £45 million which are suffering Covid-19 disruption.

Under the CLBIL scheme businesses will be able to borrow up to £200 million, providing the facility amount does not exceed either double the annual wage bill of the UK business of the borrower for 2019 (or the last year available), or 25% of the total turnover for the UK business of the borrower in 2019. Companies borrowing more than £50 million through the scheme will be subject to restrictions on dividend payments, senior pay and share buy-backs during the period of the loan, including a ban on dividend payments and cash bonuses, except where they were previously agreed.

Term loans and revolving credit facilities over £50m will be offered by CLBILS lenders which have secured additional accreditation from the British Business Bank. The maximum size for invoice finance and asset finance facilities is £50m

The scheme is accessible to businesses from banks and lenders accredited by the British Business Bank. A full list of these is available here.

The CLBIL scheme is one of a number of measures announced by government, more details of which can be found here

Who is eligible?

Businesses with a turnover of over £45 million are eligible for the scheme. The firm must be UK based in its business activity and should have a borrowing proposal which, were it not for Covid-19 disruption, would be considered viable by the lender. The lender also needs to determine that the provision of the finance will enable the business to trade out of any short-to-medium term difficulty.

Companies who have received facilities from the Bank of England’s Covid Corporate Financing Facility (CCFF) are not eligible. There is no requirement on lenders to lend commercially first under the CLBIL scheme, though given the different nature of this to the CBIL scheme it may be economically advantageous for the borrower to do so.

On 19 May the government announced that companies borrowing more than £50 million through the CLBIL scheme will be subject to restrictions including:

  • Dividends: Borrowers cannot make any dividend payments
  • Share buyback: Borrowers agree any share buybacks
  • Executive pay: Borrowers cannot pay any cash bonuses or award any pay rises to senior management (including the board) except where they were a) declared before the CLBILS loan was taken out, b) is in keeping with similar payments made in the preceding 12 months, and c) does not have a material negative impact on the borrower’s ability to repay the loan.

How is this different to the CBIL scheme for smaller businesses?

Unlike the CBIL scheme for smaller businesses, the CLBIL scheme does not have Business Interruption Payment to cover interest and fees for the first 12 months. Borrowers are responsible for the payment of all interest and fees.  

However, under the CLBIL scheme businesses should receive the economic benefit of the government guarantee reflected in the interest rate charged by lenders.

Is the CLBIL scheme a loan or a grant?

The scheme is not a grant. The scheme provides a guarantee to a lender to allow them to provide finance, but businesses will still have to repay this loan or facility. 

The government has announced a number of support measures for businesses, such as grants, which businesses may be eligible for. Further information on these initiatives is available here.

Please note there are restrictions around dividend retribution for businesses while they are benefiting from a CLBIL scheme facility. Details can be found on the British Business Bank and will be communicated by lenders.

Will personal guarantees be taken?

Personal guarantees will not be taken for facilities under £250,000. For facilities above this, claims on personal guarantees applied to the Scheme Facility cannot exceed 20 per cent of losses on the Scheme Facility after all other recoveries have been applied.

Can I access the CLBIL scheme if I am seeking syndicated lending?

Syndicated lending is possible under the scheme, however, only those lenders who are accredited by the British Business Bank can use CLBILs on their element of the facility. It is possible that a number of the syndicate will be accredited and some not. It is worth engaging with your agent or lead lender.

Further detailed Questions and Answers on the scheme are available on the British Business Bank’s website here.

What if our finance provider is not accredited for the scheme?

Not all lenders are accredited by the government though additional lenders are working closely with the British Business Bank to become accredited as quickly as possible. All banks and lenders are open for business however, and the CLBIL scheme is only one option that a business may be eligible for.

How do we apply for a CLBIL scheme loan?

Businesses should engage a lender through their existing channels including relationship manager. 

Information online on banks’ websites may also be useful for further information on the scheme. Lenders are constantly keeping their websites updated with the latest information, including FAQs, which can answer many customer queries. Telephone lines remain extremely busy so businesses who are interested in understanding the options available to them are advised to look at their lender’s website in the first instance, which will include the latest information on the support available and should be able to answer many queries.

Term loans and revolving credit facilities over £50m will be offered by CLBILS lenders which have secured additional accreditation from the British Business Bank.

How long will the loan take to approve?

There is significant demand for these facilities with banks and finance providers working tirelessly to deliver money to viable businesses as quickly as possible. Businesses should engage a lender through their existing channels including relationship manager who will be able to advise on application and approval procedures.

If we have already accepted government support will this be taken in to account when approving the loan?

The banking and finance industry is doing all it can to support business customers and can provide short term working capital facilities for customers reliant on Coronavirus Jobs Retention Scheme payments to pay wages. Lenders and finance providers will take confirmation of an HMRC furlough payment into account when making lending and credit decisions.

COVID-19

As the situation with Covid-19 in the UK evolves rapidly many consumers and businesses have questions about how the banking and finance industry will be able to support them to access the finances, support and guidance they need.

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