Government measures in key jurisdictions 3rd edition final - Flipbook - Page 137
Anthony Turner | anthony.turner@farrer.co.uk | +44 (0)20 3375 7460
Ian De Freitas | ian.defreitas@farrer.co.uk | +44 (0)20 3375 7471
Loans and
financial
support
Lending is available under five new schemes that have been introduced in the UK:
•
Has the
government put in
place any new
bank funding
schemes?
•
•
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•
•
•
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The Covid Corporate Financing Facility (CCFF) – this scheme provides funding (through commercial
paper being issued by the business and purchased by the Bank of England (BoE)) to larger
businesses and corporates with investment grade credit ratings in order to support their liquidity
and working capital issues by helping them to, for example, pay wages and suppliers due to the
disruption caused by Covid-19 to their cashflows. It will initially run for twelve months. The CCFF is
operated by the BoE under an agreement with HM Treasury. The BoE and HM Treasury stated that
they will keep under review whether to propose any extensions or variations of the CCFF in the
future. On 22 June 2020, the BoE issued an updated consolidated market notice to provide clarity
of existing policy as to what constitutes ‘eligible securities’ for the purpose of the operation of the
CCFF. This update follows earlier consolidated market notices published by the BoE on 19 May
2020 and 26 May 2020.
The Coronavirus Business Interruption Loan Scheme (CBILS) – this scheme is designed to support
lending to SMEs (businesses with a turnover of no more than £45 million), that are experiencing
lost or deferred revenues, leading to disruptions in their cashflow. Businesses can borrow up to £5
million. It will initially run for six months.
The Coronavirus Large Business Interruption Loan Scheme (CLBILS) – this scheme is designed to
support lending to mid-sized and larger UK businesses with a group turnover of more than £45
million (the upper limit for CBILS) that are suffering disruption to their cashflow due to lost or
deferred revenues due to the Covid-19 outbreak. Businesses can borrow up to £200 million. It will
initially run for six months. For loans above £50 million, borrowers cannot make any dividend
payments other than those that have already been declared, may not make any share buybacks on
dividend payments, may not pay any cash bonuses, or award any pay rises to senior management
(including the board) except where they were declared before the CLBILS loan was taken out, are in
keeping with similar payments made in the preceding 12 months, and do not have a material
negative impact on the borrower’s ability to repay the loan.
Except in respect of certain residential development facilities, a CLBILS loan will not be
subordinated to and must at rank on at least a pari passu basis with the most senior obligations
(including secured and/or super-senior obligations, if any) of the Borrower. A CLBILS loan must
share in all collateral taken by any lender from the borrower or, where the borrower is a financing
vehicle, any member of the borrower’s group (subject to certain exceptions).
Bounce Back Loan Scheme (BBLS) – this scheme was introduced to help provide financial support
to smaller businesses across the UK that are losing revenue and seeing their cashflow impacted by
Covid-19. It aims to assist those businesses to borrow between £2,000 and up to 25% of a
business’ turnover (maximum £50,000). It will initially run until 4 November 2020, with the
Government retaining the right to extend it.
The Future Fund (FF) – this scheme was put in place by the Government for start-up businesses as
CBILS does not apply to loss making businesses. Under the FF, the Government will match any
investment given to start-up businesses by making loans which will be convertible into equity if not
repaid. Initially, those businesses must have previously raised £250,000 from private investors in
the previous five years, with HM Treasury making clear that the amount could be increased if
needed. Due to the popularity of the FF, more funding is now being made available by the
Government. The scale of the FF will be kept under review. It will initially run until the end of
September 2020.
Since the FF launched in May 2020, its eligibility criteria have been amended to include innovative
companies that participate in accelerator programmes based outside the UK. These companies
previously did not qualify to take part in an accelerator programme because they had to register in
an overseas jurisdiction, but the new criteria mean they can now access the FF, providing they meet
all the other conditions of eligibility.
With the exception of BBLS and FF, these schemes ensure that businesses that were viable prior to
the outbreak of Covid-19 will have access to funding. Those businesses who were facing
financial difficulty prior to the outbreak, will find it more difficult to get access to this funding.
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