The criteria for businesses to become eligible for the Coronavirus Business Interruption Loan Scheme (CBILS) has been expanded allowing with immediate effect, small and struggling businesses to apply for lending under the CBILS.

Previously, the criteria required applicants to be a number of things, but a key item was that an applicant must not be classed as a “business in difficulty” on 31 December 2019.  A “business in difficulty” is one that, as at 31 December 2019, had:

• accumulated losses of more than half of its subscribed share capital for limited companies, or for unlimited liability companies its capital; or
• started, or had fulfilled the criteria to be put into, collective insolvency proceedings; or
• previously received rescue aid that was yet to be reimbursed (or, in the case of a guarantee, terminated); or
• received restructuring aid, and was still under a restructuring plan; or
• where it does not meet the SME criteria) has fallen below solvency ratios for the previous two years

The Treasury has now written to major lenders, to express that:

“By working with key industry bodies like the CBI and the BVCA, the government sought changes from the European Commission to ensure that businesses that were viable before the Covid-19 outbreak would be able to access support through CBILS. The Commission has now amended the Temporary Framework to allow such support to micro and small businesses, which were classed as undertakings in difficulty on 31 December 2019.”

Going on to state that:

“We therefore wanted to set out our expectation that all accredited lenders will implement these changes in their own decision-making processes. This will ensure that even more businesses are receiving support at this difficult time, keeping in mind that lenders may now be able to offer CBILS facilities to businesses that were previously ineligible”

This means, with the potential shock to businesses given that the furlough scheme has been cut back, the change in EU state aid rules will allow businesses who were unable to access funds under the CBILS scheme to now access government funds.

This expansion of the CBILS will allow smaller businesses – meaning those with fewer than 50 employees and turnover less than £9 million of turnover – who previously were not eligible for lending under the CBILS, will now be eligible. This will be welcome news to those small businesses who have incurred large liabilities to be eligible for loans up to £5 million.

Please contact the Moorcrofts’ corporate team, if you would like further information on the Coronavirus Business Interruption Loan Scheme or other debt or equity financing .