Undertakings in financial distress to benefit from Coronavirus Business Interruption Loan Scheme
On 30 July 2020, the UK Government announced changes to the government-backed Coronavirus Business Interruption Loan Scheme (CBILS) following the European Commission’s amendments to the "Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak" (EU Temporary Framework). These changes effectively mean that more SMEs will be able to borrow up to £5 million under the CBILS than previously.
CBILS was launched in March 2020 to support SMEs adversely impacted by the coronavirus outbreak. However, due to restrictions under the EU Temporary Framework, businesses categorised as ‘undertakings in difficulty’ at the end of 2019 have been, up until now, generally excluded from government support and ineligible to apply for a loan under the CBILS.
The amendment to the EU Temporary Framework and the resulting changes to the CBILS rules, which are effective from 30 July 2020, will now allow businesses which employ fewer than 50 persons and with an annual turnover of less than £9 million to access CBILS even if they have been in financial difficulties prior to 31 December 2019.
The British Business Bank is expected to circulate new guidance to lenders on how to identify undertakings in difficulty, helping more viable businesses access government-backed financial support.
For further information about government-backed loan schemes, please see our summary here.
Simona Cavasio is an Associate in the Banking and Finance team.
The current global crisis is evolving rapidly, and the rules and guidance for individuals, companies and other entities to manage its implications are similarly fast moving. Notes such as this may be out of date almost as soon as they are published. If you have any questions prompted by this note or on any other matter relevant to you, please get in touch with your usual contact at Forsters.