Our Immediate Guidance
In the current climate, we would advise businesses to consider the below key aspects:
Short-term funding requirements
Businesses need to have a clear view on immediate short term funding needs (preferably using a minimum of a 13-week cash flow). Your cash flow should reflect the other financial support measures that have been made available by the UK Government.
The UK Governments scientific advice outlines that the pandemic could lead to restrictions being in place for at least half the year. Consider the longer term impact on your business and changes that you may need to make. Look at your longer term funding requirements on this basis. Plan for the worst. Hope for the best.
Lending decisions will remain economically rational. Lenders need to know that your business is viable in the longer term. Update your longer term forecasts (at least 12 months) and present a clear and deliverable plan. With pre-knowledge of your business and trading, your existing lender(s) should be best placed to support you at this time with any immediate funding needs.
Lenders are already receiving a large number of requests. This is likely to lead to delays in process applications. Plan and prepare, but move quickly.
For all resources, see below.
UK Government Funding Support
The UK Government’s funding response to Covid-19 is rapidly changing.
Therefore, below are some links that may prove helpful:
- You can receive live email updates from the UK Government on the Covid-19 response by subscribing here >
- The UK Government has announced a range of financing support for UK business:
- Covid-19 Corporate Finance Funding programme (CCFF): Most relevant for Investment Grade businesses and Large Corporates. Details, available to view here >
- Coronavirus Large Business Interruption Loan Scheme (CLBILS):For UK businesses with turnover over £45m. Current information, available here >
- Coronavirus Business Interruption Loan Scheme(CBILS): Most relevant for UK Mid-Market and SME businesses with turnover < £45m, is available here >
In the first instance your best approach is to speak with your existing lender(s) as soon as possible. There are a number of lenders and investors that remain open to support UK businesses, with a recognition that many are suffering from short term liquidity shocks.
The Coronavirus Business Interruption Loan Scheme (CBILS)
So what is CBILS? DC Advisory breaks down what CBILS is and what it could mean for your business:
- Access: Provided by the British Business Bank through participating lenders. To the extent that one of your lenders is not a ‘participating provider’ then they can seek to get themselves added
- 80% guarantee: The scheme provides the lender with a government-backed partial guarantee (80%) against the outstanding facility balance
- No fees and interest for 12 months: The UK Government will cover the first 12 months of interest payments (and any upfront fees), so businesses will benefit from lower initial repayments. You (the borrower) remain liable for repayments of capital
- Up to £5m: The maximum value of a facility provided under the scheme will be £5m
- Security: A lender can choose to use the scheme for unsecured lending for facilities of £250,000 and under. Lenders will not be permitted to request personal guarantees for loans of less than £250,000. For facilities above £250,000, refer to the British Business Bank website and individual lenders for more details.
- Finance terms: Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years
- You (the borrower) always remain 100% liable for the debt
- Key eligibility criteria:
- Be UK-based in its business activity
- Have an annual turnover of no more than £45 million
- Have a borrowing proposal which the lender: (i) would consider viable, were it not for the Covid-19 pandemic; or (ii) believes will enable you to trade out of any short-term to medium-term difficulty
To apply for a CBILS-backed facility, businesses may wish to consider approaching one or more participating lenders to discuss their borrowing needs. In the first instance we would advise that you approach your existing lender(s) as soon as possible.
On 3 April CBILS was extended so that all viable small businesses will be eligible, not just those unable to secure regular commercial financing.
The Coronavirus Large Business Interruption Loan Scheme (CLBILS)
The new Coronavirus Large Business Interruption Loan Scheme (CLBILS) will provide a government guarantee of 80% to enable banks to make:
- Loans of up to £25m to firms with an annual turnover of up to £250m
- Loans of up to £50m to firms with an annual turnover of over £250m
The scheme will be delivered through commercial lenders, backed by the British Business Bank. The Government will provide lenders with an 80% guarantee on individual loans for businesses that would be otherwise unable to access the finance they need.
Lenders are still expected to conduct their usual credit risk checks, but this scheme allows them to specifically support business that were viable before the Covid-19 outbreak but are facing significant cash flow difficulties, that would otherwise make their business unviable in the short term.
Businesses remain responsible for repaying any facility they may takeout.
1. Be UK-based in its business activity
2. Have an annual turnover of over £45 million
3. Have a borrowing proposal which the lender:
- would consider viable, were it not for the Covid-19 pandemic
- believes will enable you to trade out of any short-term to medium-term difficulty
Businesses should check the British Business Bank website to find out which lenders are able to provide the type of finance they are looking for. They should then approach a lender or lenders as they would normally.
Other UK government support measures
The UK Government has announced a raft of other financial support measures. These include the Job Retention Scheme (to cover 80% of furloughed workers wage costs); rates relief; VAT and tax deferment; staff sick pay and cash grants. Guidance to employers and businesses about COVID-19 from gov.uk is available here >
We acknowledge that there are a number of businesses that will not be able to access either of the proposed UK Government funding schemes. In the first instance your best approach is to speak with your existing lender(s) as soon as possible. There are a number of lenders and investors that remain open to support UK businesses, with a recognition that many are suffering from short term liquidity shocks.
DC Advisory’s Capital Advisory Group
DC Advisory’s Capital Advisory group advises borrowers, investors and creditors on structuring and raising capital in a diverse range of circumstances.
For more information view our Capital Advisory page here >