The deadline for submitting applications to CCFF, CBILS, CLBILS and BBLS has passed
In January 2021, the UK government announced that the deadline for submitting applications for CBILS, CLBILS and BBLS was to be extended until March 31, 2021. The deadline of March 31, 2021 has now passed and the UK government has failed. has not extended the deadline for submitting applications. new requests for government guaranteed debt financing are no longer accepted under these programs. The CCFF closed to new purchases on March 23, 2021.
CCFF, CBILS, CLBILS and BBLS were introduced by the UK government to help mitigate the economic effects of the COVID-19 outbreak. The Recovery Loan Scheme (RLS) was introduced to help businesses recover and grow from the business disruption caused by the pandemic.
RLS is a form of debt assistance provided on terms similar to CBILS and CLBILS in that it provides a government-backed guarantee (up to 80 percent) of commercial loans. The key criteria of RLS are however different from those of CBILS and CLBILS. Some of the key features are:
- term loans, overdrafts, asset finance and bill finance facilities up to £ 10 million can be borrowed and backed by the RLS guarantee;
- the maximum value of one installation per company is the lower of (i) £ 10 million; (ii) double the company’s payroll for the last year available; or (iii) the applicant’s liquidity needs for the next 12 months (for large companies) or 18 months (for SMEs). The maximum that a business can borrow is also subject to a limit of £ 30million per group of borrowers, but private equity and venture capital related businesses will not be deemed to be included in the definition of ‘ group”.
- minimum facility size varies from £ 1,000 for asset and bill financing to £ 25,001 for term loans and overdrafts;
- term loans and asset finance facilities are available with repayment terms of up to six years and overdrafts and bill finance facilities of up to three years; and
- for installations of £ 250,000 or less personal guarantees cannot be taken. For installations over £ 250,000 personal guarantees may still be required, but no collection action can be taken on a primary private residence and collections are capped at a maximum of 20% of the installation’s unpaid balance. once the proceeds of business assets have been applied. .
One of the main differentiators between CBILS and BBLS is that RLS does not include payment for business interruption and therefore the borrower under an RLS facility does not benefit from the benefits. Government payments for interest and charges incurred in the first year of installation and will be responsible for the full costs of the installation upfront.
The RLS was put into service on April 6, 2021 and is currently open until December 31, 2021. Full details of the RLS can be found here.
To be eligible for the RLS, a business must meet certain eligibility criteria, some of which are as follows:
- the company must self-certify that it has been affected by COVID-19;
- the business must be UK-based in its business activity and generate more than 50 percent of its turnover from business activity (i.e. the sale of goods or services);
- the business must be engaged in commercial activity in the UK at the time it withdraws the facility;
- the business must have a loan proposal that would be considered viable by the lender; and
- the business must not be subject to collective insolvency proceedings (more specific requirements may apply to this aspect if the business falls within the scope of the Northern Ireland Protocol).
Similar to CBILS, CLBILS and BBLS, RLS is available from lenders accredited by the British Business Bank and the list of accredited lenders can be viewed. here.
The decision of whether a business is RLS eligible and the terms of the facility are entirely at the discretion of the accredited lenders and therefore the potential lender should be satisfied with the creditworthiness of the potential borrower. It is likely that a lender will require certain documents from a borrower in order to assess affordability, this will likely include:
- management accounts;
- business plan;
- historical accounts; and
- details of the company’s assets.
Unlike the CBILS and the CLBILS, the RLS does not require a company to comply with certain turnover thresholds in order to be able to access the system.
Applications for the payback loan program
Depending on the type of financing sought, a borrower should contact their relationship manager (at a clearing bank if they have one), apply through the individual approved lender’s website, or consider hiring a financing advisor. to help them identify the most suitable type of financing for the business. In many cases, lenders can offer financing on normal commercial terms outside the scope of RLS, which can be more flexible for a business.
It is important to note that while the RLS offers a government-backed guarantee of up to 80 percent of an eligible facility, the final decision as to whether a business meets the eligibility requirements to fall under the program and whether the business is deemed to be creditworthy is entirely at the discretion of the accredited lenders.