The Coronavirus Large Business Interruption Loan Scheme (CLBILS) builds upon the UK government’s financial support being extended to UK businesses during the current period of COVID-19 disruption and uncertainty, and is being offered alongside the UK government’s Coronavirus Business Interruption Loan Scheme (CBILS) and Covid Corporate Financing Facility (CCFF). King & Wood Mallesons' summary on CBILS can be found here and it’s summary on the CCFF can be found here. The CLBILS scheme is primarily geared towards medium to large sized businesses, businesses that fall outside eligibility for CBILS due to their annual turnover exceeding £45 million but are not considered investment-grade and therefore ineligible for the CCFF. CLBILS, like CBILS, is being administered by the British Business Bank, but all applications will need to be channelled via lenders participating in CLBILS and accredited by the British Business Bank. Availability for CLBILS commenced on 20 April 2020.
What is CLBILS?
CLBILS is a loan scheme which assists eligible UK businesses with obtaining access to lending in circumstances where, but for the disruption caused by the COVID-19 virus pandemic, the business would have been able to attain such borrowings without the assistance of CLBILS and will enable the business to trade out of any short-to-medium term financial difficulty caused by the COVID-19 pandemic. Importantly, businesses wishing to obtain a loan under CLBILS must have annual turnover in excess of £45 million (thereby taking them outside of eligibility criteria for a CBILS loan) and also not have obtained any funding under the CCFF. A CLBILS facility will be partially guaranteed by the UK government, with businesses obtaining the benefit of a CLBILS facility remaining fully liable for repayment of their CLBILS facility.
What does CLBILS cover?
CLBILS can be used to assist businesses with obtaining term loans, asset finance facilities, revolving credit facilities (including overdrafts) and invoice finance facilities, provided that the maximum repayment term does not exceed three years.
Borrowing limits and caps will apply to finance obtained under CLBILS. Borrowing will be capped at £25m for businesses with a group turnover between £45 million and £250 million, with a £50 million cap applying to businesses with a group turnover exceeding £250 million.
In addition to the above borrowing caps, CLBILS finance will also be limited to an amount not exceeding any of the following:
- double the borrower’s annual wage bill for the most recent year available;
- 25% of the borrower’s total turnover for the most recent year available; or
- the borrower’s liquidity needs for the next 12 months (subject to the provision of appropriate justification and self-certification by the borrower).
Who is eligible for CLBILS assistance?
The baseline eligibility criteria for access to CLBILS is as follows:
- a UK based business that meets the eligibility criteria (set out below);
- annual group turnover exceeding £45 million (to take the business outside of eligibility for CBILS), with more than 50% of its turnover generated from trading activity;
- the borrower has not received a facility under the CCFF;
- the lending proposal would have been considered viable by the lender if the business was not disrupted by the COVID-19 pandemic;
- the finance is for a suitable business purpose;
- the lender believes that the provision of finance to the business will enable the business to trade out of any short-to-medium term difficulty and not go out of business during the short-to-medium term;
- the applicant certifies that it has been adversely impacted by the COVID-19 pandemic;
- the applicant establishes to the lender’s satisfaction that it will be able to afford to repay the CLBILS facility;
- the lending proposal meets the guidelines for CLBILS (as noted above); and
- the lending proposal is offered by a lender that has been accredited by the British Business Bank as being eligible to participate in CLBILS.
What businesses are eligible for a CLBILS facility?
Businesses that meet the following criteria are eligible to obtain a CLBILS facility:
- business activity is operated through a business account;
- the business generates more than 50% of its turnover from trading activities;
- the business is one of the following:
- sole trader;
- body corporate;
- limited partnerships;
- limited liability partnerships; or
- any other legal entity carrying out business activity in the UK through a business account in any sector with an annual turnover over £45 million; and
- the business is not one of the following:
- credit institutions falling within the remit of the Bank Recovery and Resolution Directive;
- building societies;
- insurers or reinsurers (insurance brokers are not part of this exclusion);
- public sector bodies;
- further-education establishments if they are grant-funded; or
- state-funded primary and secondary schools.
What security may need to be provided to support a CLBILS facility?
Any decision on whether any CLBILS facility will need to be secured will be left for determination by the accredited lender applying its usual credit policies.
With respect to personal guarantees, the CLBILS imposes the same restrictions under CBILS on the ability of an accredited lender to request personal guarantees to support a CLBILS facility. No personal guarantees are able to be requested to support a CLBILS facility that is less than £250,000, and any personal guarantee to apply to a CLBILS facility in excess of £250,000 will be limited to 20% of the losses from that CLBILS facility after all other recoveries have been applied.
Notably, the CLBILS guidance does not specifically state that recovery under personal guarantees will not be permitted against the guarantor’s principal private residence, unlike the CBILS scheme.
What benefits will CLBILS provide to eligible businesses?
The main purpose of CLBILS will be to facilitate short term liquidity to eligible businesses affected by the COVID-19 pandemic by making lending facilities available to such businesses that would not otherwise be available to them on normal commercial lending terms, due to their financial performance being adversely impacted by the COVID-19 pandemic. The availability of facilities in such circumstances will be facilitated by the UK government providing a guarantee of 80% of the amount of the facility granted to eligible businesses under CLBILS. The UK government guarantee will not incur any direct fees to borrowers, as accredited lenders will pay a fee to the UK government for each CLBILS facility.
Unlike CBILS, there are no additional benefits to borrowers under a CLBILS facility - the UK government will not be paying for any interest payments or any lender-imposed fees incurred under CLBILS facility.
How to apply for a CLBILS facility?
Whilst the British Business Bank is administering CLBILS, all CLBILS facilities will be given by lenders participating in CLBILS and accredited by the British Business Bank.
The British Business Bank has also clarified that the CLBILS scheme itself is not subject to an upper limit of financial support, so businesses will not need to rush to apply for a CLBILS facility and instead encouraged eligible businesses to consider when funding is more likely to be required and to make an application for a CLBILS facility at that time.
Currently, there are 10 accredited lenders for CBILS facilities, and the British Business Bank has indicated that the list of CBILS accredited lenders will be widening in the future as it accepts applications for new lenders to become accredited to provide facilities for CLBILS.
King & Wood Mallesons’ Banking & Finance team are available to discuss your queries on all areas of finance and financial markets law, please contact Khai Nguyen in our London office.