Newly Announced UK Schemes

28 July 2020


The Coronavirus Business Interruption Loan scheme (CBILS), and Covid Corporate Financing Facility (CCFF) and Bounce Back Loans scheme (BBLS) are newly announced UK Government schemes, intended to help business in the wake of the COVID-19 outbreak.


Companies can apply for loans or guarantees from a £330 billion fund aimed at helping firms continue operating during this difficult period.


CBILS: what, where and who?


The funding for the scheme will be provided by the British Business Bank, which is a development bank wholly owned by the UK government.


The recent UK budget announced attractive terms for both businesses and lenders, with the aim of supporting the continued provision of finance to UK businesses during these challenging times.

What is the essence of the scheme?

The main idea is to support businesses access bank lending and overdrafts. The UK government will provide accredited lenders (see list below) with a guarantee of 80% on each loan they make to give these lenders confidence in continuing to provide finance to small business. Such guarantees are vital in changing the credit decision given by a lender.

What are the loan limits ?

What is the interest rate?

Who can apply?

Concessionary terms?

CBILS business finance products available

What are the financial terms?


Application Process


The application process is simple and should take no longer than a standard EFG. To use CBILS, small businesses should consider approaching one or more participating lenders to discuss their borrowing needs.


  • How to apply for the CBILS?

  1. If a business wishes to apply for a CBILS, they should apply to one or more of the accredited lenders with their borrowing proposal.

  2. If the accredited lender can offer finance on normal commercial terms (i.e. without CBILS), they will offer it.

  3. If the small business has a sound borrowing proposal but insufficient security, the accredited lender considers the business for support via CBILS.


  • Who is responsible for decision?

CBILS decision making is fully carried out by the accredited lenders. The lender,d not the British Business Bank, deals with any issues from businesses with an active or historical EFG, including collecting guarantee payments or changing their repayment profile.


  • Security for lending

  1. The accredited lender can choose to use CBILS for unsecured lending for facilities below £250,000.

  2. The Big Four banks (Barclays; HSBC; Lloyds Banking Group; the Royal Bank of Scotland Group) have agreed that they will not take personal guarantees under CBILS as security for lending below £250,000.

  3. Primary residential property cannot be taken as security in the framework of CBILS.


  • Guarantee

The CBILS guarantee is to the lender and not the small business.


  • Which lenders are included in the list and can provide similar loans?

Accredited lenders

Range of business finance products

ABN AMRO COMMERCIAL FINANCE

Terms Loan and Invoice Finance

ARKLE FINANCE

Asset Finance

ART BUSINESS LOANS

Term Loan

ASKIF

Term Loan

BANK OF IRELAND (NORTHERN IRELAND)

Term Loan and Revolving Credit

BANK OF SCOTLAND

Term Loan

BARCLAYS

Term Loan

BCRS BUSINESS LOANS

Term Loan

BUSINESS ENTERPRISE FUND (WEST & NORTH YORKSHIRE AND THE NORTH EAST)

Term Loan

CHAMBER ACORN FUND (HUMBER) LTD

Term Loan

CLYDESDALE AND YORKSHIRE BANKS

Term Loan

COMPASS BUSINESS FINANCE

Term Loan and Asset Finance

COVENTRY & WARWICKSHIRE REINVESTMENT TRUST

Term Loan

DANSKE BANK (NORTHERN IRELAND)

Term Loan

DSL BUSINESS FINANCE (SCOTLAND)

Term Loan

ENTERPRISE ANSWERS (CUMBRIA)

Term Loan

FINANCE FOR ENTERPRISE (DONBAC)

Term Loan

FIRST ENTERPRISE

Term Loan

GC BUSINESS FINANCE

Term Loan

GENESIS ASSET FINANCE

Term Loan

HAYDOCK FINANCE

Asset Finance

HITACHI CAPITAL BUSINESS FINANCE

Term loan and Asset Finance

HSBC

Term Loan

LET’S DO BUSINESS GROUP

Term Loan

LLOYDS BANK

Term Loan

MERSEYSIDE SPECIAL INVESTMENT FUND

Term Loan

METRO BANK

Term Loan

NATWEST

Term Loan

NEWABLE (FORMERLY GLE)

Term Loan

ROBERT OWEN COMMUNITY BANKING

Term Loan

SANTANDER

Term Loan

SKIPTON BUSINESS FINANCE

Invoice Finance and Term Loan

SOUTH WEST INVESTMENT GROUP

Term Loan

THE ROYAL BANK OF SCOTLAND

Term Loan

TSB

Term Loan

UKSE

Term Loan

ULSTER BANK (NORTHERN RELAND)

Term Loan

CCFF: what, where and who?


The Bank of England announced temporary and targeted measures with the aim of supporting the continued provision of finance to UK businesses during these COVID-19 times. The facility is designed to support liquidity among larger firms.


  • What is the essence of the scheme?

The main idea is to support liquidity among larger firms, helping them to bridge coronavirus disruption to their cash flows through the purchase of short-term debt in the form of commercial paper.CCFF helps supportfundamentally strong companies, but who are experiencing severe disruption to their cashflows.For example, CCFF helps businesses to pay wages and suppliers.


All non-financial companies that meet the eligibility criteria can use this measure.


  • Who can apply?

A company can apply for this support if it meets the following conditions:

  1. UK incorporated companies. They are including companies with foreign-incorporated parents.

  2. Company makes a material contribution to the UK economy.

  3. Company has significant employment in the UK.

  4. Company generates significant revenues in the UK.

  5. Company serves a large number of customers in the UK or has a number of operating sites in the UK.

  6. Company can demonstrate it was in sound financial health prior to the COVID-19 outbreak. This means company that had a short or long-term rating of investment grade, as at 1 March 2020, or equivalent

  7. Company should allow bank to look through temporary impacts on firms’ balance sheets and cash flows.


  • What if my company does not have a credit rating

There are two ways to solve this problem:

  1. Assessment of Bank of England

  2. To receive such an assessment, in the first instance, company should speak to its bank.

  3. If that bank’s advice is that the company was viewed internally as equivalent to investment grade rating as at 1 March 2020, then company can contact Bank of England on CCFFeligibleissuers@bankofengland.co.uk.

  4. Bank of England will then make an assessment of the company’s equivalent investment grade rating as at 1 March 2020.

  5. Obtain a credit rating

The company or its bank can get in touch with one of the major credit rating agencies to seek an assessment of credit quality in order to use the CCFF.


  • What is“in sound financial health”?

It depends on rating, if the company has it. Investment grade means a short-term rating of A3/P3/F3/R3 or above, or a long-term rating of BBB-/Baa3/BBB-/BBB low or above. Investment grade rating should be from least one of the major credit ratings agencies: S&P, Moody’s, Fitch or DBRS Morningstar.

If the company has different ratings from different agencies, and one or more rating is below investment grade then the company cannot apply for this measure.


  • What is limitation of support?

The minimum size of an individual security that can be sold from an individual participant is £1 million nominal. Offers should be rounded to the closest £0.1 million.


  • What are the financial terms of CCFF?

The facility will be operated for a minimum of 12 months and for as long as steps are needed to relieve cash flow pressures on firms.


  • What should be the commercial paper?

  1. Issued directly into Euroclear and/or Clearstream.

  2. Maturity of 1 week to 12 months.

  3. A credit rating of A-3 / P-3 / F-3 / R3 from Standard & Poor’s, Moody’s, Fitch and DBRS Morningstar as at 1 March 2020, if it is available.

  4. Without non-standard features such as extendibility or subordination.


  • What are the restrictions for papers?

A commercial paper can be eligible in the following cases:

  1. Commercial paper cannot be issued by financial sector entities (banks, building societies, insurance companies and others).

  2. Commercial paper cannot be issued by leveraged investment vehicles or from companies within groups which are predominantly active in businesses subject to financial sector regulation.

  3. Commercial paper cannot be issued by public bodies or authorities, entities governed by public law or public undertakings.


  • Does a company need to have issued commercial paper before to use this support?

The company does not need to have issued commercial paper prior to using the measure.


  • How to apply?

The company should contact its bank in order to issue commercial paper. It is important to note that not all banks issue commercial paper. The company can use another bank to do it. If commercial paper is eligible for the scheme, any bank will help to issue required commercial paper to the CCFF.


  • Is the information regarding using CCFF open?

No. Each Thursday at 15:00 the total amount of commercial paper purchased that week will be published; and the total amount of commercial paper that has been purchased to date, minus the amount of commercial paper that has matured will be also published.


The names of issuers and securities purchased or eligible will not be made public. Companies that participate in the CCFF must sign a confidentiality agreement with the bank.


BBLS: what, where and who?


The Governmentannounced a new temporary and targeted loan scheme aimed at supporting micro-businesses in UK during these COVID-19 times. The new scheme is called Bounce Back Loans scheme.


  • What is the essence of the scheme?

The main idea is to support small firms. Small businesses will benefit from a new fast-track finance scheme providing loans with a 100% government-backed guarantee for lenders.


  • Who can apply?

BBLS aimed at supporting micro-businesses. There will be no complex eligibility criteria; however specific criteria have not yet been published


  • What are the loan limits?

The loan limits under BBLS are a minimum of £2,000 and a maximum of £50,000. Firms will be able to get loans worth up to 25% of turnover.


  • What is the interest rate?

The Government will make a business interruption payment to cover the first 12 months of interest payments and any lender-levied charges.


  • How to apply for the BBLS?

The Government announced the BBLS will be able to apply from Monday 4th May. The funds should be available within 24 hours of approval.


Summary


CBILS, CCFF and BBLS are new temporary measures only. After the end of the epidemic or stabilisation of the situation, these approaches will be terminated.


The UK Government, the British Business Bank, the HM Treasury, the Bank of England and the lenders have defined and agreed the CBIL and CCFF scheme’s details, specifications and eligibility. However, the information regarding schemes may be changed and updated in the coming days.



For further information on any of the points above contact

Mikita Makayou at mikita@lexefiscal.com, or

Dr Frank at clifford.frank@lexefiscal.com.

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