When it was introduced in 2020, the Coronavirus Large Business Interruption Loan Scheme (CLBILS) gave cash-constrained businesses the funding they needed to stay afloat. But is CLBILS now a brake on business growth? We explore whether now’s the time to seek liquidity from other sources.

CLBILS funding came at a cost

The Coronavirus Large Business Interruption Loan Scheme (CLBILS) was a lifesaver during the Covid-19 lockdowns. It provided vital funding, enabling businesses to continue to tick over despite dwindling cashflows. But CLBILS came with a cost. The partial government guarantee that oiled the wheels and encouraged banks to provide additional funding to businesses was subject to strict conditions. These included a prohibition on certain dividends, shareholder payments and share buybacks. In the case of larger loans, certain cash bonuses and pay rises to senior executives were also prohibited. And, in the main, the CLBILS funding could not be subordinated to other funding. Today, these conditions remain in place and banks are careful not to infringe them for fear of losing the government guarantee.

Has CLBILs become a hindrance rather than a help?

Meanwhile, the world has changed. Lockdown restrictions have been lifted, cashflows are improving and, as a result, businesses may be starting to feel that the conditions attached to their CLBILS funding are too onerous. If this applies to your business, you may, for example, now want to incentivise management to deliver growth rather than mere survival. So is it time to release the brake and refinance your outstanding CLBILS debt?

Liquidity is plentiful if you want to refinance

If you’re one of the fortunate businesses where cashflows have recovered sufficiently, available liquidity is plentiful. You can use this liquidity to restructure your current debt arrangements and, in the process, free your business from the conditions attached to your CLBILS funding. What is more, due to the basic laws of supply and demand, it’s likely that you will be able to access new funding without a material price increase.

Refinancing could offer peace of mind too

CLBILS restrictions aside, there are other reasons why you might want to bring forward your refinancing timetable. For example, in response to current and anticipated macroeconomic forces, you may want the peace of mind of knowing you’ve put in place a funding package that will enable you to ride out turbulence in global economic forces.

Take care if you can’t refinance your CLBILS debt

Where your current trading and cashflows mean that a full refinance of CLBILS funding is not yet realistic, but you’d still like to refinance your other debt facilities, you face greater complexity. You will need to take care that you balance the strict conditions that apply to your CLBILS funding with the preferences of ongoing or incoming funders.