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Markel Insurances

20 Apr 2020

Business support through the Coronavirus Business Interruption Loan Scheme

Cash is king. That’s especially true now, when SMEs across the country are grappling with the immense challenge of paying fixed costs with little or no revenue.

To help alleviate the pressure, the Government has created the Coronavirus Business Interruption Loan Scheme (CBILS). Funding, in the form of loans, is available to all UK-based businesses with an annual turnover of no more than £45 million. The debt can last for up to six years and be provided for loans, overdrafts, invoice finance and asset finance of up to £5 million. The Government will also provide some support with interest payments and lender fees.

The scheme is designed to make it slightly easier for borrowers to get a ‘yes’ from their lender and help them manage any short to medium-term difficulties in this unprecedented situation.
Of note, however, is that borrowers are still entirely liable for the debt.

If you or any of your clients are planning on borrowing less than £250,000, most large banks will not require personal guarantees as security. Applications can be made through all major banks and more than 40 accredited lenders.

The rules of the scheme and, list of approved lenders, can be found on the British Business Bank website.

Which business are eligible to apply for the scheme?

Smaller businesses (SMEs) can apply for the full amount of the facility, up to a maximum of £5 million. To be eligible for the CBILS, a business must:

  • Be UK-based in its business activity

  • Have an annual turnover of no more than £45 million

  • Have a borrowing proposal which the lender would consider viable, were it not for the current pandemic

  • Self-certify that it has been adversely impacted by the coronavirus (COVID-19).

Businesses with a turnover of over £45 million have access to the Coronavirus Large Business Interruption Loan Scheme.

The following businesses are excluded from the scheme:

  • banks and building societies, insurers and reinsurers (but not insurance brokers)

  • public-sector organisations, including state-funded primary and secondary schools

  • employer, professional, religious or political membership organisations, and trade unions.

What’s the latest on the CBILS?

The original scheme went live on Monday 23 March 2020, for an initial six-month period. An expanded scheme, available to smaller businesses who would have previously met the requirements for a commercial facility but would not have been eligible for CBILS, became operational from Monday 6 April 2020.

As at mid-April, and in response to wide criticism of the emergency loan scheme, the Chancellor indicated he will remain open to improving the scheme, potentially looking to other countries to aid his decisions. The German government, for instance, is guaranteeing 100% of loans to previously profitable businesses, compared to 80% in the UK.

Criticism has focussed on lender delays in processing enquiries, stemming from the complexity of the scheme, and strict requirements that are stopping many businesses being able to apply. In early April, the government announced plans to speed up the approval process and claim to have since seen a four-fold increase in approvals and five-fold increase in the amount of money lent.

As of 15th April, UK Finance has revealed that the banking and finance sector has lent over £1.1 billion to SMEs through the CBILS. As the Chancellor confirms:
“Loan approvals have doubled in a week with more than 6,000 businesses benefiting from over £1.1 billion of loans - and it’s vital we continue this upward trajectory.”

However, the British Chamber of Commerce (BCC)’s Coronavirus Business Impact Tracker has found that only 2 per cent of businesses have successfully accessed the CBILS, with nine percent of respondents unsuccessful. In contrast, 15 per cent said they had successfully accessed grants for small businesses, a rise of seven per cent on the previous week.

To see more COVID-19 related content and how Markel UK are assisting our policyholder and brokers, visit the COVID-19 Hub.

Our COVID-19 Hub contains a range of information and resources to best support our clients during this difficult time. To receive the latest news and insights by email sign-up here.

Markel brokers and policyholders also have access to our Law hub, providing thousands of DIY contracts, forms guides and links to valuable resources for businesses needing assistance with the everyday running of their organisations.

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