The Coronavirus Business Interruption Loan Scheme (CBILS) eligibility criteria have been changed to make it more accessible to fast-growth and start-up businesses. The changes came into effect on 30 July 2020 and could benefit micro and small businesses which were classed as 'undertakings in difficulty' at the end of 2019.

Undertakings in difficulty

In line with the requirements of the Temporary Framework (which enables Member States to use flexibility under state aid rules to support businesses financially), CBILS eligibility criteria previously provided that undertakings in difficulty could not access the loan scheme for funding of £30,000 or more (the de minimis amount under state aid rules). In its FAQs for SMEs the British Business Bank (BBB), which administers CBILS on behalf of the UK Government, provides that an SME in difficulty includes one which has:

  • accumulated losses of more than half of its subscribed share capital for limited companies; or
  • started, or had fulfilled the criteria to be put into, collective insolvency proceedings; or
  • previously received rescue aid that was yet to be reimbursed (or, in the case of a guarantee, terminated); or
  • received restructuring aid, and was still under a restructuring plan.

These criteria do not apply to SMEs which, on 31 December 2019, had existed for less than three years.

What has changed?

Following changes to the Temporary Framework, the amended CBILS eligibility criteria have dropped the accumulated losses test for smaller businesses. Businesses with fewer than 50 employees and less than £9million 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).

CBILS applicants will need to determine their turnover and number of employees in line with EU rules around the definition of micro, small and medium-sized enterprises to establish if they can benefit from this change. Guidance on the EU rules is available here.

Who will benefit?

This is a welcome change to CBILS, aimed at unlocking access to the government loans scheme to more viable businesses. Start-up and scale-up businesses, and those backed by private equity and venture capita,l which have borrowed to grow and were either pre-profit, or carried high levels of debt before Covid-19 could now access CBILS loan facilities. For start-ups in particular, the possible CBILS availability provides a valuable alternative to the Future Fund which we have blogged about here.

Who won't benefit?

Businesses with more than 50 employees or more than £9million in annual turnover and/or annual balance sheet will still be subject to the undertaking in difficulty requirement and will not benefit from this change. Some of these viable larger businesses may be classed as undertakings in difficulty and have so far been unable to secure CBILS funding. New guidance from BBB soon to be circulated to accredited lenders is expected to clarify how to approach the various elements of the test, which may benefit these businesses in particular.

Undertakings in difficulty continue to be eligible for Bounce Back Loans, subject to state aid limits.

How Brodies can help 

We continue to work closely with clients on CBILS applications and enquiries. Please get in touch with Bruce Stephen or Marion Macinnes if you would like to discuss your funding options.

For other changes to the 'undertaking in difficulty' criteria see our blog here.


Lindsay Lee

Senior Associate