Good news for fast-growing firms as the British Business Bank changes CBILS guidance

The Coronavirus Business Interruption Loan Scheme (CBILS), which closes for applications on 31 March 2021, provides financial support to UK SMEs that have experienced disruption as a result of the Covid-19 outbreak, but until recently it was not easily accessible for fast-growth firms.

On Thursday 16 July, the British Business Bank changed its guidance for the CBILS programme following amendments to EU State Aid Law. From 30 July 2020, businesses with fewer than 50 employees and less than £9m turnover will not need to pass the “undertaking in difficulty” test.

The test required UK SMEs to have lost less than half of their subscribed share capital, as of the end of 2019. When the scheme initially launched, this was viewed as an important criteria to determine if participating SMEs would be able to repay their CBILS obligations, but has proven to be unduly punitive of high-growth businesses.

What makes innovative SMEs the exception?

Innovative SMEs typically invest in future growth, creating losses early in their lifecycle. This means that the balance sheets of these businesses could portray them to be “undertaking in difficulty” at the end of last year, making them ineligible for the CBILS programme. This has affected many fast-growth SMEs, despite their need for funding being just as great as other businesses.

The change in guidance is significant for the innovation ecosystem; innovative, young SMEs, that have been affected by Covid-19, will now have the same access to finance as their more established peers, unlocking a huge amount of funding and helping them to emerge stronger on the other side of the crisis. Uber, Venmo, Whatsapp and Instagram are all businesses founded in the wake of the 2008 financial crisis, proving that investment in R&D and growth is as important in a crisis as it ever is.

More broadly, the continual evolution of the CBILS programme and the variety of lenders it has attracted, has cemented the scheme as one of the most comprehensive and accessible SME support programmes in the world. CBILS’ commitment to supporting innovative SMEs now, will help ensure that the UK remains one of the leading countries for start-up and innovation.

What does this all mean for your business?

The change to the “undertaking in difficulty” criteria does not mean automatic access to the CBILS programme; UK SMEs will still need to prove that they have been adversely affected by Covid-19 and convince their lender that they are credit-worthy.

More than 100 lenders are accredited to provide funding under CBILS, but not all of them will want to lend to growth SMEs that do not match their ideal risk profile or previous lending experience.

Growth Lending was founded to support UK SMEs where these traditional lenders would not. We welcome applications from innovative businesses and moreover, actively want to lend to them.

With more than 15 years of experience working with fast-growth firms, we have the capital available and a desire to support the next generation of innovators in the UK. Growth Lending is fully accredited for CBILS term loans, invoice financing and revolving credit facilities, drawing on the expertise of our teams in each of these areas, so that we can offer tailored, individual solutions to a wide range of innovative SMEs.

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