While having faced some criticism since its launch, the British Business Bank’s Coronavirus Business Interruption Loan Scheme (CBILS) now seems to be making a real impact. According to government statistics, as at 19th July 2020 a total of £12.2 billion had been approved under the scheme by accredited lenders across a total of 55,674 successful applications. That equates to an average loan of just under £220,000, with approval rates now close to 50%.
In brief, a business is eligible to apply for a loan of up to £5 million under the scheme if it is based in the UK, has annual revenues of under £45 million and generates over 50% of its sales from the UK. Also, firms must demonstrate that they were not a “business in difficulty” as at 31st December 2019. Broadly, this means that they had not been put into insolvency proceedings, not paid back any state aid given or had received restructuring aid and were still under a restructuring plan. Also under the definition, limited companies must not have accumulated losses of more than half of their subscribed share capital. For example, if a firm had £100,000 in share capital it would be considered to be in difficulty if it had accumulated losses of more than £50,000 – a common situation in small, high growth companies.
However, from the end of the month it looks like lenders may be able to offer CBILS to a wider range of businesses who had previously been unable to access the scheme. This comes following recent EU changes in State Aid Law relating to the “undertaking in difficulty” test, with the British Business Bank planning to amend its CBILS application criteria.
The amendment means that smaller businesses with fewer than 50 employees and less than £9,000,000 in annual turnover and/or annual balance sheet will not be considered undertakings in difficulty unless they are (a) subject to collective insolvency procedure under national law, or (b) in receipt of rescue aid (which has not been repaid) or restructuring aid (and are still subject to a restructuring plan). This changes will apply from 30th July 2020.
For smaller, fast growth companies this may be crucial in them being able to access the loan scheme. The key point is that the new rules eliminate the “accumulated losses of more than half of subscribed share capital” test. Under the existing criteria, any business classified this way was not eligible for CBILS, although firms less than three years old were exempt. However, it meant that older companies still investing in growth may not have been able to apply, even though they still had a good business proposition and banks might have considered them for lending outside of the scheme. Crowd for Angels welcomes the changes and expects to see further acceleration of lending under the CBILS scheme in the coming months.