Following the 17 March 2020 announcement by the Chancellor the Rt. Hon. Rishi Sunak MP of support for business including two mechanisms for businesses to access finance, the Covid Corporate Financing Facility for larger investment grade businesses; and the Coronavirus Business Interruption Loan Scheme for smaller businesses, it was clear that many companies, from privately owned businesses up to sub-investment grade businesses were not provided for in that package and there was no meaningful provision for businesses that would typically access corporate or leveraged loans (either from banks or private credit funds) or the high yield or sub-investment grade capital markets.
On 3 April 2020 the Chancellor announced a new scheme for larger companies, with the creation of the new Coronavirus Large Business Interruption Loan Scheme (CLBILS) to ensure that more firms are able to benefit from government-backed support during this difficult time. It will provide a government guarantee of 80% to enable banks to make loans of up to GBP25 million to firms with an annual turnover of between GBP45 million and GBP500 million.
The Treasury has stated that loans backed by a guarantee under CLBILS will be offered at commercial rates of interest. Lenders will still be expected to conduct their usual credit risk checks. This scheme allows lenders to specifically support businesses that were viable before the coronavirus COVID-19 outbreak but now face significant cash flow difficulties that would otherwise make their business unviable in the short term.
The new scheme is expected to support a wide range of businesses to access finance products including short term loans, overdrafts, invoice finance and asset finance. Businesses will remain responsible for repaying any facility they may take out.
Who is eligible?
To be eligible, a business must:
- be UK-based in its business activity
- have an annual turnover between GBP45 million and GBP500 million
- be unable to secure regular commercial financing
- have a borrowing proposal which the lender:
- would consider viable, were it not for the coronavirus COVID-19 pandemic
- believes will enable the business to trade out of any short-term to medium-term difficulty
- not be a bank, building society, insurer, reinsurer or public-sector organisation
How it is accessed?
It is expected that the scheme will be delivered through commercial lenders. Further details of the scheme will be announced later this month following further consultation with business.
Still some businesses left behind
Although the CLBILS will provide welcome support to a large number of businesses that were not able to avail of the earlier schemes, it is still the case that there is no meaningful equivalent financial support for lending to businesses with turnover above GBP500 million which are below investment grade and unable to access the Covid Corporate Financing Facility. It remains to be seen whether further measures will be introduced to help support these businesses.
and then 