Earlier today, Rishi Sunak announced additional support will be available for businesses who have been impacted by the Omicron variant. So, what do we know? Businesses…
Yesterday changes to CLBILS were trailed in a news release by HMT/ British Business Bank.
- maximum loan size available under the scheme will increase from £50m to £200m, up to 25% of turnover;
- alongside the increase, companies receiving help of over £50 million through CLBILS on terms of more than 12 months must agree certain restrictions, including not paying dividends and exercising restraint on senior management pay.
Further information will be provided on Tuesday 26 May.
Details of CLBILS as currently configured are on the British Business Bank website here with extracts below.
In essence, this scheme is likely to be of relevance to a particular sub-set of businesses: those that are of certain size to whom their lender will advance them (further) sums at this stage if this additional debt is underpinned by the Government guarantee. This is in contrast to Coronavirus Business Interruption Loan Scheme (CBILS) where there is an interest free period and an expectation of a 6 to 12 month capital repayment holiday (see further below).
For those businesses who are interested in making an application for a CLBILS product please contact Paul Stout, Corporate Finance Partner, who is part of the team that look at the more complex, high value debt raises for our clients.
What is CLBILS?
Similar, at face value, to the Coronavirus Business Interruption Loan Scheme (CBILS), the scheme is delivered by commercial lenders where the Government guarantees 80% on individual loans for businesses. However, CLBILS is for larger businesses:
- For businesses with an annual turnover over £45m
- A lender can provide:
- up to £25 million to businesses with turnover from £45 million up to £250 million
- up to £50 million to businesses for those with a turnover of over £250 million
There are a number of important differences in a CLBILS backed product to that of a CBILS backed one, including:
- Unlike CBILS the Government will not cover the interest and any lender-levied fees in the first 12 months of any CBILS facility so commercial rates of interest will be charged
- The maximum repayment term is 3 years.
- Lender and borrower are still free to enter into loan agreements outside of CLBILS — for example where there is no economic benefit to the borrower of taking out a CLBILS loan over normal commercial lending
Your business must:
- Be UK-based in its business activity
- Have an annual turnover over £45 million
- Self-certify that it has been adversely impacted by the Coronavirus
- Not have received a facility under the Bank of England’s Covid Corporate Financing Facility (CCFF)
- Have a borrowing proposal which the lender:
- Would consider viable, were it not for the COVID-19 pandemic
- Believes it will enable you to trade out of any short-term to medium-term difficulty
- Businesses from any sector can apply, except the following:
- Credit institutions (falling within the remit of the Bank Recovery and Resolution Directive)
- Insurers and reinsurers (but not insurance brokers)
- Building societies
- Public-sector bodies
- Further-education establishments, if they are grant funded
- State-funded primary and secondary schools
- The business must generate more than 50% of its turnover from trading activity
Parameters of CLBLIS
The amount borrowed should not be greater than one of the following:
- Double the borrower’s annual wage bill for the most recent year available
- 25% of the borrower’s total turnover for the most recent year available
- The amount may be increased to cover their liquidity needs for the next 12 months, with appropriate justification and based on self-certification of the borrower
The British Business Bank have stated that borrowers should expect a lender to follow its normal credit policy when assessing security generally. However:
- No personal guarantees will be permitted for facilities under £250,000
- For facilities of £250,000 and over, claims on personal guarantees applied to the scheme facility cannot exceed 20% of losses on the scheme facility after all other recoveries have been applied
Maximum term 3 years; minimum term 3 months.
Commercial rates of interest will apply.
Two lenders have also said the following about its CLBILS products on its CLBILS webpage:
- The loan will be documented via market standard documentation which may incorporate financial covenants and information undertakings. Certain restrictions will apply on dividend payments during the term of the facility
- Term loans provided under CLBILS must not be subordinated to any other senior obligations of the borrower. If security is provided to support existing senior lending facilities, the CLBILS loan will also benefit from this security on an equal footing basis (specific carve-outs for certain security in relation to asset finance and invoice finance will however apply)
How do businesses apply?
As with CBILS, CLBILS will be operated through accredited lenders. As of today (30 April 2020) there are 9 accredited lenders. Where I can I have linked the names below to their webpages on their CBLIS offering and note that in the majority of cases for further information you should contact your relationship manager and a number of the lenders have made explicit statements that you need to be existing customer to apply.
- Bank of Scotland
- Barclays Corporate
- Danske Bank (Northern Ireland)
- HSBC UK
- Nat West
- Ulster Bank (Northern Ireland)
Also, noted on British Business Bank website:
- Not every accredited lender can provide every type of finance available under CLBILS, and the amount of finance offered varies between lenders. Please see the lenders’ websites for more information on the amounts they are able to offer
- The lender has the authority to decide whether to offer you finance
- If one lender turns you down, you can still approach other lenders within the scheme (but see note above)
PKF Francis Clark
The British Business Bank website details some of the information that a lender will need from a potential borrower and states that “Lending to mid-cap and larger businesses is typically more bespoke and can take longer to negotiate by lenders.”
If you require further assistance in preparing an application our Corporate Finance team has the specialised skills to assist on complex debt positions with a number of the senior team previously having worked at a senior level within banks. We are working with a number of clients helping with the preparation of their CBILS application, and we anticipate that we will be helping clients with CLBILS too – this help ranges from a review of an application with recommendations for improvements to a full service provision, preparing the application itself. If you need any help, please get in touch.