24 Apr 2020

The latest limb of the government's support package for business opened on Monday to facilitate access to finance for medium sized and larger businesses affected by the coronavirus outbreak. As with the other government lending support packages, access to the Coronavirus Large Business Interruption Loan Scheme ("CLBILS") is through British Business Bank accredited lenders. The national accredited lenders on the scheme are Bank of Scotland, Barclays, Clydesdale Bank, Yorkshire Bank, HSBC, Lloyds, NatWest, Santander and RBS (so a much smaller list than for the CBILS scheme for SME businesses). Danske Bank and Ulster Bank are also accredited for Northern Ireland only. We are expecting that this list will be expanded as other lenders are accredited – and so the absence of a bank (particularly a clearing bank that is accredited under the scheme for SMEs) doesn't at this point indicate that it will not be participating.

How is the support structured?

Unlike the CCFF, this is not a direct lending scheme where financing is provided directly to borrowers from the Government. The funding is provided by the accredited lenders but the lenders receive a government backed partial guarantee covering 80% of the outstanding facility balance.

Who is eligible?

The CLBILS is designed to support business with a turnover of more than £45m. Businesses with a turnover from £45m to £250m can apply for up to £25m of finance whereas large businesses with a turnover in excess of £250m, can apply for up to £50m. The support can be given in the form of a term loan, a revolving credit facility (which might include an overdraft), an invoice finance facility or an asset finance facility. In each case the amount borrowed should not be greater than either (i) double the borrower’s annual wage bill for the most recent year available or (ii) 25% of the borrower’s total turnover for the most recent year available. However, with appropriate justification and based on self-certification of the borrower, the amount may be increased to a greater amount considered sufficient to cover a borrower's liquidity needs for the next 12 months. The precise rules which will be used to determine eligibility are not yet publicly available and so it remains to be determined how these criteria will be interpreted and assessed by lenders (e.g. is this just UK wages/turnover?). The maximum term is 3 years. Business Interruption Payments (which are provided under the CBILS scheme for SME businesses) will not be made for CLBILS. This means that arrangement fees may be charged and interest will be payable from the outset. However, the 80% government backed partial guarantee will cover interest and fees as well as principal.

To be eligible for the CLBILS a business must:

  1. Have UK based business activities (note this is not clarified in the materials published so far and the degree of connection to the UK required cannot yet be confirmed).
  2. Exceed the turnover threshold of £45m.
  3. Have been adversely impacted by coronavirus.
  4. Not have used the Bank of England Covid Corporate Financing Facility.
  5. Have a borrowing proposal which, were it not for the current pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty.

What is a viable borrowing proposal?

The scheme is intended to include businesses where there are short-to-medium term performance issues due to adverse impacts of the coronavirus, but lending can only be agreed where a lender reasonably believes (a) the finance will help them trade out of any short-to-medium term cashflow difficulties, and (b) if the facility is granted, the borrower is not expected to go out of business in the short-to-medium term. There is not currently a great deal of specific information on how lenders will assess these requirements so this should be considered at an early stage in any discussions with a potential lender.

Corporates looking to access finance under the Scheme may need to provide security as the CLBILS requires lenders to follow their normal credit policy. Potential applicants will therefore need to consider any borrowing restrictions in existing documents (e.g. existing facility documentation or equity documents such as an Investment Agreement), the terms of any negative pledge arrangements and what consents might be required.

Please contact one of the banking partners for more information.