CBILS ends – what is the new Government loans scheme for businesses?

The Coronavirus Business Interruption Loans Scheme (CBILS) has now closed to applications. The Chancellor announced a new Recovery Loan Scheme will take its place.

This new business lending scheme is available to all sizes of businesses and will include  business loans, business overdrafts, asset finance and invoice finance.

The Recovery Loan Scheme offers finance up to £10m per business and this may be used for any legitimate business purpose including funding for growth and investment. It launches on the 6 April 2021 and will continue until 31 December 2021.

The Government has chosen to continue backing these business loans up to 80%. The expectation is that this guarantee to cover 80% of any defaults will help to maintain lender confidence and avoid finance for businesses drying up. CBILS also offered lenders a guarantee of 80% of the loan value but those business owners wanting to borrow more than £250,000 had to provide a personal guarantee in addition to the Government’s 80% backing. It is not clear yet if this requirement and loan value will continue with the new Recovery Loan Scheme.

Businesses will be able to apply for term loans and overdrafts between £25,001 and £10m per business. While asset and invoice finance will be available from £1,000 up to £10m per business. The maximum terms available will be up to six years for term loans and asset finance, while overdrafts and invoice finance is up to three years.

The lenders participating in the scheme have not yet been announced.

Businesses must be trading in the UK and there is no turnover restriction. Businesses must be considered viable if it were not for the pandemic and cannot be in collective insolvency proceedings. Those businesses that have accessed finance under CBILS or Bounce Back Loans will also be able to use the Recovery Loan Scheme if they meet the other eligibility criteria of the scheme and the lender.

The remaining eligibility requirements are not yet clear. If the scheme operates in a similar way to CBILS, then lenders will also introduce their own specific requirements for the businesses they are happy to accept.

CBILS and Bounce Back Loans offered a 12-month interest free and payment free period. The new Recovery Loan Scheme will not include this offer and businesses applying for finance will need to meet their repayments including interest from the outset.

Businesses applying for this scheme will also need to undertake credit checks and fraud checks for applicants.

More detail is due to be announced on 6 April 2021.

The calculator below generates an instant indicative invoice finance quote (based on current market rates) and gives insight into the amount of funding you could release:

Call 023 8202 9739 to speak to our preferred invoice finance broker Hilton-Baird Financial Solutions.

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