5 May 2021
CORONAVIRUS: Recovery Loan Scheme vs CBILS
The Coronavirus Business Interruption Loan Scheme (CBILS) was closed to new applications with effect from 31st March 2021 and has been replaced by the Recovery Loan Scheme (RLS). Businesses might be wondering what the two schemes have in common and what the main differences are. Read our latest article to find out more...
What is CBILS?
The Coronavirus Business Interruption Loan Scheme (CBILS) was introduced in response to the pandemic which forced many businesses considered non-essential to change the way they operated, or in some cases, close their doors altogether. Under CBILS, businesses could apply for loans or finance from one of the 117 lenders that signed up for the scheme and if approved, the government would guarantee 80% of the amount borrowed as well as paying interest and fees for the first 12 months.
CBILS was aimed at small, UK-based businesses with a turnover of less than £45 million who were not public sector bodies, primary or secondary schools funded by the state, or banks or insurers. To be eligible for a loan under CBILS, businesses had to show that their trade would be viable were it not for the pandemic and that the business had been adversely impacted by the pandemic.
Applying for a loan or finance under CBILS was much the same as applying for a loan or finance under normal circumstances. Lenders still needed to see supporting documentation and would assess the affordability of the loan before making a decision. If a business was rejected by one lender, then they were able to apply with one of the other lenders in the scheme.
What is RLS?
The Recovery Loan Scheme (RLS) was announced as part of the budget on 3rd March and replaces CBILS. Just like CBILS, eligible businesses can apply for finance with one of the lenders participating in the scheme and the government will guarantee 80% of the finance to the lender. This scheme is open until 31st December 2021, although this is subject to review. The government has also said that businesses who acquired finance under CBILS may still apply through RLS for additional finance, provided that they meet the eligibility criteria.
Comparing RLS to CBILS
The government has not just re-named CBILS to RLS. Whilst the two schemes are very similar, there are also some key differences between them. CBILS was aimed at small businesses by capping turnover at £45 million, however, RLS is open to any business and there is no turnover cap. Since RLS is open to all businesses, the government has also increased the amount which can be borrowed from £5 million under CBILS up to £10 million per business under RLS.
Under CBILS, no minimum amount of borrowing was given, although any businesses wishing to borrow more than £30,000 were also required to show they were not classed as a business in difficulty on 31st December 2019. The government has stated that RLS covers term loans or overdrafts of between £25,001 and £10 million and invoice or asset finance of £1,000 to £10 million per business. The maximum length of the facility depends on the type of finance applied for but is the same under CBILS and RLS, this is 3 years for loans and overdrafts and 6 years for other types of finance.
Eligibility criteria is very similar between the two schemes, however, as well as the criterion relating to viable
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