CLBILS: the essential Q&A for businesses

On 17 April the government extended the concept of its Coronavirus Business Interruption Loan Scheme (CBILS) to larger businesses and the Coronavirus Large Business Interruption Loan Scheme (CLBILS) was born. Good news for medium to large businesses, but what are the facts?

What is it CLBILS?

The scheme (which is organised by the British Business Bank (BBB)) will run for 6 months from 20 April 2020, although it may be extended.

The government will back any facility under the scheme with an 80% guarantee.  The lender has to be accredited to participate in the scheme.  The borrower remains liable for the full debt (including fees which, unlike for CBILS, can be charged for the facility), the protection is for lenders to make them more willing to make funds available to businesses losing revenue and suffering cashflow problems in these uncertain times.

What types of  CLBILS loan are available?

As you would expect, there are term loans available; the scheme also covers revolving credit facilities (such as overdrafts) and invoice finance and asset finance facilities. However, there does, of course, need to be accredited lenders for these different facility types. Not all lenders will offer all facility types. If a lender didn't offer the facility type as a product before the crisis then it is less likely it will be able to do so now as it won't have an existing credit process for it.

The loans can be for as short a period as three months or as long as three years.  It seems likely that the majority will fall somewhere in between and will depend on a number of factors, including the type of facility, the business needs (how has its sector been affected and when is recovery likely) and the level of risk. 

Which banks are 'accredited' CLBILS lenders?

The accreditation period started immediately on 17 April. The BBB website maintains a list of who is accredited and the list includes many of our high street banks.  However, they are not all accredited for all types of loan. So far just a few are accredited for revolving credit (overdraft) facilities and, at the time of publication, none for invoice finance or asset finance.

You do not have to use your current lender but it is likely that if you do so matters can be progressed more quickly as they will already have a lot of information about you and your business from your existing relationship. They may also have existing security over the key assets of the business.  It's worth looking around however as some may offer better terms for what you need and experience with CBILS shows that some of the accredited funders are able to respond to applications and make funds available to businesses quicker than others.

There's been a lot in the press about personal guarantees -will I need to give one?

Lenders may well request personal guarantees however there is some comfort for business owners and directors as they will be capped at 20% of losses and then only after all other recoveries have been applied.

What will the paperwork look like?

There is no standard set of documents from the BBB so, as for any type of loan, this will vary from lender to lender and likely be impacted by the size of the loan.  

This is not a time at which lenders will want to or have capacity to produce brand new documentation.  You can expect the CBILS documentation to be similar to forms they have used in the past adapted to meet the requirements of the scheme.

For most lenders, this will mean using their own template forms but for  loans at the higher end it may be that Loan Market Association (LMA) forms of documentation will be simplified and adapted for use by some lenders.

You can expect to see representations about the information in the viability proposal along with fairly stringent ongoing information requirements and restrictions on taking cash out of the business as lenders keep a close eye on the financial position of the business going forward as the lockdown situation develops.

Although the documentation may be familiar from previous facilities you've had with the lender, you need to review it with fresh eyes bearing in mind the current circumstances of the business. 

In addition, there may be existing priority agreements in place that need to be amended to take into account the new facilities, or new priority agreements might be required (particularly if you are borrowing from a CLBILS lender that is not your current lender).

Aside perhaps from particularly large loans, lenders are unlikely to be willing to negotiate or amend their documents in any significant way so it is important to review and understand the terms and decide whether or not you can accept them.