Changes to EU State Aid Undertaking in Difficulty test increases access to the Coronavirus Business Interruption Loan Scheme for smaller businesses

Following the recent EU changes in State Aid Law relating to the ‘undertaking in difficulty’ test for businesses, the British Business Bank has amended its Coronavirus Business Interruption Loan Scheme.

The amendment means that smaller businesses with fewer than 50 employees and less than £9,000,000 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 £9,000,000 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 who had previously been unable to access CBILS.

The Bounce Back Loan Scheme (BBLS) is unaffected by this change.