Who Benefits From The CBILS Change?

Having seen rapidly growing, early-stage SMEs fall foul of the “undertaking in difficulty” test when applying for the Coronavirus Business Interruption Loan Scheme (“CBILS”), the rule change on 30 July 2020 was welcomed.

Previously, issues arose with CBILS applications from successful, early stage SMEs that had burned through share capital as part of their rapid development plans. Despite now being profitable, many had early losses following investment in the right people, ideas and marketing. If these losses had eaten into over half their subscribed share capital, as at 31 December 2019, and the business was over 3 years old, it was classified as being” in difficulty”. This unfairly placed it in the same category as a business subject to insolvency proceedings.

Many such businesses were innovative companies that had been funded by loans from committed investors and directors, as opposed to share capital. Whilst profits were now accelerating, early losses and the investment structure meant they did not qualify for CBILS support.

From 30 July 2020, following changes in State Aid Law, the accumulated loss criteria has been relaxed for businesses with fewer than 50 employees and less than £9M in annual turnover and/or on annual Balance Sheet. Such businesses will now only be “undertakings in difficulty” if they are subject to insolvency proceedings, in receipt of unpaid rescue aid or subject to restructuring plans post restructuring aid.

If your business was initially rejected for CBILS finance as an “undertaking in difficulty” and meets the revised criteria, it may certainly be worth reapplying. Remember other British Business Bank and individual lender criteria will still need to be met, most importantly your ability to service any debt.

Need help with your application?

Our Banking Advisory team is led by Delphine Paterson who is an experienced banker with an extensive network and first-hand experience of bank credit processes, attitude to risk and pricing strategies for borrowing and operational needs. delphine.paterson@sgllp.co.uk / 020 7291 5792