Practical Guidance Note #7

COVID-19: Emergency business loan scheme revamped and registering for grants

From 6 April 2020, new rules will apply to the Coronavirus Business Interruption Loan Scheme (CBILS).

It has emerged that, following strong criticism, Chancellor Rishi Sunak has bolstered the emergency loans scheme for businesses struggling to survive the coronavirus pandemic. Sunak has urged the banks to ‘do their part’ to aid small businesses during the Covid-19 crisis. There has been growing anger that support for small business owners was not arriving quickly enough and was failing to reach all the companies that need it the most.

3rd April 2020

The Treasury has admitted that it has received more than 130,000 loan enquires from SMEs but fewer than 1,000 had been approved to date. The situation is critical with a recent British Chamber of Commerce poll revealing that 62% of members polled warning they had no more than three months of cash left to cover running costs.

The changes to the scheme should make it easier for firms to access loans going forward and will also mean more businesses are able to access financial support during the lockdown.

The basic principles of the scheme remain, namely:

  • SME businesses up to £45 million turnover
  • Finance up to £5 million
  • Government guarantee of 80% of the loan, with no guarantee fee
  • Government will pay arrangement fee and first 12 months’ interest
  • Loans and asset finance up to six year term; overdraft and invoice finance up to three years

The key changes relate to security requirements.

Previously, a government-backed CBILS loan was only available to firms that were unable to borrow on normal commercial terms from their bank, where the reason for the decline of the application was insufficient security. Following the changes, insufficient security is no longer a condition to access the scheme. 

Significantly, lenders will also be banned from asking company owners to provide a personal guarantee on loans up to £250,000 but businesses wishing to take out a loan will still be 100% liable for the debt.  Personal guarantees can still be required for larger borrowing, but the new rules make clear that this is capped at the 20% of the loan not covered by the government guarantee; and that the lender cannot take a charge over the business owner’s principal residence.

Applications to access the business interruption loan scheme will no longer be limited to businesses that have been refused a loan on normal commercial terms and businesses are now able to apply directly for CBILS lending.  This is hoped to accelerate take-up of CBILS borrowing.

In a further extension of the scheme, a new Coronavirus Large Business Interruption Loan Scheme (CLBILS) will offer government-backed loans of up to £25 million to bigger firms with revenues of between £45 million and £500 million.  This is good news in that it addresses a group of businesses left behind by the original proposals: too large to access the SME CBILS but unable to issue investment grade commercial paper under the Bank of England’s CCFF scheme.

Whilst there has been criticism of banks charging interest rates of up to 30%, it appears that the changes haven’t addressed this in that the Treasury has not put in place restrictions on the interest rates that banks can charge for loans, notwithstanding interest rates are close to 0%.

In summary the revamped package of measures covers:

  • Lenders would be banned from requesting personal guarantees on loans under £250,000
  • Insufficient security is no longer a requirement
  • The loan scheme would be extended so that it covered all small companies affected by Covid-19 and not just those unable to get commercial funding
  • New scheme to bolster support for larger firms not currently eligible for loans, under which the government would provide a guarantee of 80% so that banks could make loans of up to £25m to firms with an annual turnover of between £45m and £500m

Link to the British Business Bank:

Commenting on the changes, Old Mill's Mark Neath said...

‘It’s certainly a positive step that larger businesses can now access funding, that was an obvious gap in the support on offer, but the government appears to be making announcements in a hurry and then trying to fill in the detail later which is understandable given the circumstances.  Unsurprisingly, this leads to imperfect schemes being released, but it’s alarming that changes seem to be reactive to newspaper headlines, rather than well thought through policy decisions.  I wouldn’t be surprised to see further announcements on this in the coming weeks. 

For all the criticism which they receive, banks by-and-large take a responsible approach to lending. The point which always seems to be omitted by commentators demanding easier access to borrowing is that loans need to be paid back. 

I would urge any business looking to a CBILS loan to carefully consider whether it’s the right thing for their business; take all steps possible to minimise the borrowing requirement; and model their cash flows in recovery period on a range of scenarios to assess the affordability of repayments.’

Important: Accessing government grants

There also appears to be some confusion around unlocking grants. Initially businesses were told that local authorities would be contacting them to claim the £10,000 small business grant or £25,000 hospitality/retail grant announced in the Chancellor’s initial stimulus package.

It seems that some local authorities are expecting businesses to register online to access the small business grant scheme.

We would therefore recommend that if you are seeking support then it’s important to register online with your local authority, if at all possible, rather than waiting to be contacted by them as originally advised.

Please see below the detail and links to the online forms for Cornwall, Devon, Dorset, Somerset and Wiltshire.


Cornwall Council:

Cornwall Council is writing to all businesses that according to their records might qualify for a grant fund payment. If you have not received a letter by 3 April or can’t access your business and think you should qualify please contact them on 0300 1234 171. The letter details exactly what you need to do.

The Government plans to pay the funds to local authorities at the start of April. Ratepayers who qualify for payments should start to receive payments very shortly.


Wiltshire Council:

Around £1.5 million has been issued to small businesses as at 2 April 2020 as Wiltshire Council starts to release vital grants to support struggling businesses during the coronavirus outbreak.

Earlier this week the council wrote to over 8,000 businesses eligible for either a £10,000 grant for businesses in receipt of Small Business Rates Relief (SBRR) or rural rates relief and up to £25,000 for businesses in the retail, hospitality and leisure sectors with a rateable value of less than £51,000.

Since then over 2,000 applications have been received and are currently being assessed and much-needed funding has been transferred to the first 58 local businesses.

For businesses that are closed and are unable to collect their letter, if you think your business is eligible you can complete the online grant form.

In addition, they are also offering businesses the opportunity to defer business rates payments for two months, and not pay in April and May. Those businesses wishing to take advantage of this can contact