The British Business Bank (BBB) has amended the terms of the Coronavirus Business Interruption Loan Scheme (CBILS) following recent EU changes in State Aid Law for businesses that will mean more small businesses can access government-backed loans.
The European Commission (EC) has relaxed its state aid rules so that small and micro businesses – meaning fewer than 50 employees and turnover less than £9m – will be exempt from elements of the ‘undertaking in difficulty’ test, and are now eligible for CBILS.
In a statement, the BBB said that smaller businesses with fewer than 50 employees and less than £9m in annual turnover and/or annual balance sheet, will not be considered “undertakings in difficulty” unless they are (a) subject to collective insolvency procedure under national law, or (b) in receipt of rescue aid (which has not been repaid) or restructuring aid (and are still subject to a restructuring plan).
Smaller businesses with more than 50 employees or more than £9m in annual turnover and/or annual balance sheet will still be subject to the ‘undertaking in difficulty’ test as defined by the European Union.
Applicants will need to determine their turnover and number of employees in line with Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises.
This change will apply from 30 July 2020, and means lenders may now be able to offer CBILS to businesses that had previously been denied access to CBILS.
The Bounce Back Loan Scheme (BBLS) is unaffected by this change.
Earlier this month, UK business groups urged economic secretary John Glen to extend CBILS to loss-making SMEs that were unsuccessful in gaining CBILS funding.
Companies that have pre-tax losses or debts, either because they are fast-growing or have private equity backing, are classified as “undertakings in difficulty” by the EU.
However, this latest announcement from the EC opens government support to start-up companies.
CBILS were launched on 23 March to offer loans to firms with a turnover of up to £45m with 80 per cent of the loans guaranteed by the government.
The government’s CBILS has so far paid out £8.2bn to 43,000 businesses (from 84,607 applications), which represents a 50 per cent approval rate.
Stephen Pegge, managing director of commercial finance at UK Finance, said: “This change will make a real difference for those smaller, viable businesses who had previously struggled to secure loans under the schemes because they were deemed to be ‘undertakings in difficulty’.
“Lenders will now be able to help more viable business secure the finance they need and will continue to engage with their commercial customers and assess any new lending applications against the revised rules.”
Letter from HMT and BEIS to UK Finance on EU State Aid changes (July 30)