Coronavirus Large Business Interruption Loan Scheme

Updated on the 17 April 2020
Government credit support for lending to larger firms

The UK Government has established the Coronavirus Large Business Interruption Loan Scheme (“CLBILS”) which will provide a partial government guarantee of 80% to enable banks to make loans of:

  • up to £25 million to firms with a group turnover of between £45 million and £250 million; and
  • up to £50 million to firms with a group turnover of over £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 liquidity needs for the next 12 months.

The CLBILS will launch on 20 April 2020.

The British Business Bank (the “BBB”) has published relevant guidance summarised below. Similar to the Coronavirus Business Interruption Loan Scheme for SMEs (the “CBILS”), the CLBILS will be delivered through commercial lenders, backed by the BBB.

How does it work?

Under the CLBILS:

  • loans will be delivered through accredited lenders backed by the BBB;
  • the government through the BBB will provide a guarantee of 80% of the loan;
  • lenders will pay a fee to benefit from the government guarantee on each CLBILS facility. Fees will vary according to the length of the underlying facilities;
  • borrowers will remain responsible for repaying the loan. [Unlike the CBILS scheme, lenders will not be able to access a Business Interruption Payment to cover interest or fees.]
Eligible products

The CLBILS will support a wide range of businesses to access finance products, including short term loans, overdrafts, invoice finance and asset finance. The term of financing can be from three months to three years.

Eligible lenders

Facilities supported by the guarantee will be provided by accredited lenders listed on the BBB’s website. The BBB has indicated it will provide further guidance for lenders under the CLBILS shortly.

Eligible borrowers

Companies must meet the following requirements to access the CLBILS:

(i) Be UK-based in its business activity;

(ii) Have an annual turnover of more than £45 million;

(iii) Have a borrowing proposal which the lender:

  • would consider viable, were it not for the COVID-19 pandemic; and
  • believes will enable the firm to trade out of any short-term to medium-term difficulty.

(iv) Self-certify that the firm has been adversely impacted by COVID-19; and

(v) Not have received a facility under the Bank of England’s Covid Corporate Financing Facility (“CCFF”).

Accordingly, whilst an investment grade credit rating is not a requirement for accessing the CLBILS, firms that have such a rating will not be able to access the scheme if they have a CCFF facility in place.

Corporates from all sectors are eligible. However, (i) credit institutions and building societies, (ii) insurers and reinsurers (but not insurance brokers), (iii) public-sector bodies, including state-funded primary and secondary schools and (iv) further education establishments, if they are grant-funded will not be eligible. Other than support under the CCFF, the eligibility criteria for CLBILS do not require lenders to take into account other forms of government support that businesses may be benefiting from e.g. the Coronavirus Job Retention Scheme.

Lending decisions

All lending decisions (including borrower eligibility) remain fully delegated to the accredited lenders. Firms will need to disclose to the lender the amount they need to borrow, the purpose it will be used for and the repayment period. Lenders will also require supporting documents for the creditworthiness of the borrower such as management accounts, cashflow forecasts and historic accounts. The lender and the borrower are still free to enter into loan agreements outside of the CLBILS (e.g. where there is no economic benefit to the borrower of taking out a CLBILS loan over normal commercial lending).

Security

No personal guarantees are permitted for facilities under £250,000.

For facilities of £250,000 and over, claims on personal guarantees cannot exceed 20% of losses after all other recoveries have been applied.

When will it launch?

The CLBILS will launch on 20 April 2020.