The Government earlier this week announced the launch of the Future Fund, a new £250m funding scheme to support innovative companies facing financing difficulties following the COVID-19 outbreak.
The new scheme, delivered in partnership with the British Business Bank, will allow innovative companies access to convertible loans and will initially be open until September 2020.
If you do require assistance in navigating through the Future Fund scheme and your options, we would be delighted either to provide limited ad-hoc guidance without requiring any commitment from you or alternatively we would be delighted to support you in a more formal capacity.
Future Fund Scheme Highlights
Further details on the Future Fund scheme are still to be released by the Government but the known key features include:
The Government will make unsecured bridge funding available alongside other private third party matched investment. The loan with constitute a maximum of 50% of the bridge funding being provided to the company, with the remaining amount provided by matched investors;
The scheme covers facilities between £125,000 and £5 million;
To be eligible, a business must be an unlisted UK registered company that has raised at least £250,000 in aggregate from private third party investors in previous funding rounds in the last five years;
The Government shall receive a minimum of 8% p.a interest to be paid on maturity of the loan and the loan will mature after a maximum of 36 months;
The bridge funding should be used solely for working capital purposes and shall not be used by the company to repay any borrowings, make any dividends or bonus payments to staff, management, shareholders or consultants;
The bridge funding will automatically convert into equity on the company’s next qualifying funding round at a minimum conversion discount of 20% to the price set by that funding round with a company repayment right in respect of the accrued interest; and
A qualifying round is one where the company raises equity funding equal at least to the aggregate amount of the bridge funding. On a non-qualifying round, the bridge funding shall convert into equity at the discount price to the round (at the election of the holders of a majority or the principal amount held by the matched investors).
How we can help
We would welcome the opportunity of supporting your business during these difficult times either in securing a COVID-19 loan under the Future Fund scheme or assisting more generally in planning and responding to the current crisis to ensure business continuity. We are currently assisting a number of clients in securing additional borrowings including situations where we have stepped into existing loan application processes to expedite, enhance delivery or increase the lending quantum.
The Government earlier this week announced the launch of the Future Fund, a new £250m funding scheme to support innovative companies facing financing difficulties following the COVID-19 outbreak.
The new scheme, delivered in partnership with the British Business Bank, will allow innovative companies access to convertible loans and will initially be open until September 2020.
If you do require assistance in navigating through the Future Fund scheme and your options, we would be delighted either to provide limited ad-hoc guidance without requiring any commitment from you or alternatively we would be delighted to support you in a more formal capacity.
Future Fund Scheme Highlights
Further details on the Future Fund scheme are still to be released by the Government but the known key features include:
The Government will make unsecured bridge funding available alongside other private third party matched investment. The loan with constitute a maximum of 50% of the bridge funding being provided to the company, with the remaining amount provided by matched investors;
The scheme covers facilities between £125,000 and £5 million;
To be eligible, a business must be an unlisted UK registered company that has raised at least £250,000 in aggregate from private third party investors in previous funding rounds in the last five years;
The Government shall receive a minimum of 8% p.a interest to be paid on maturity of the loan and the loan will mature after a maximum of 36 months;
The bridge funding should be used solely for working capital purposes and shall not be used by the company to repay any borrowings, make any dividends or bonus payments to staff, management, shareholders or consultants;
The bridge funding will automatically convert into equity on the company’s next qualifying funding round at a minimum conversion discount of 20% to the price set by that funding round with a company repayment right in respect of the accrued interest; and
A qualifying round is one where the company raises equity funding equal at least to the aggregate amount of the bridge funding. On a non-qualifying round, the bridge funding shall convert into equity at the discount price to the round (at the election of the holders of a majority or the principal amount held by the matched investors).
How we can help
We would welcome the opportunity of supporting your business during these difficult times either in securing a COVID-19 loan under the Future Fund scheme or assisting more generally in planning and responding to the current crisis to ensure business continuity. We are currently assisting a number of clients in securing additional borrowings including situations where we have stepped into existing loan application processes to expedite, enhance delivery or increase the lending quantum.
Whilst we welcomed the introduction of the Coronavirus Business Interruption Loan Scheme (CBILS) to provide funding support to businesses during the COVID-19 crisis, we were concerned at the accessibility of the scheme for all SMEs requiring assistance.
Initially to qualify for CBILS, annual turnover could not exceed £45million and the maximum loan was capped at £5million although last week it was announced that these limits were increasing to £500million and £25million respectively.
Furthermore, the scheme initially appeared onerous in respect of the personal guarantee requirements from business owners. However we are delighted that this has been relaxed with the following amendments to the scheme:
New Features to CBILS
Personal guarantees for facilities above £250,000 – Personal guarantees may still be required, at a lender’s discretion, but recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied (i.e. PG’s are limited to the portion of the loan not covered by the Government’s 80% commitment);
Principal Private Residence (PPR) – PPR cannot be taken as security to support a personal guarantee or as security for a CBIL backed facility;
Interest and fees paid by Government for 12 months – The Government will make a Business Interruption Payment to cover the first 12 months of interest payments. Banks have been instructed to waive arrangement fees and this has now been extended to cover early settlement fees so that that there is no cost to the business at all if the loan is repaid within 12 months;
No personal guarantees for facilities under £250,000– Personal guarantees of any form cannot be taken under the scheme for any facilities below £250,000;
Security – For all facilities, including those over £250,000, CBILS can now support lending to smaller businesses even where a lender considers there to be sufficient security, making more smaller businesses eligible to receive the business interruption payment. However, where there is sufficient security available, it is likely that the lender will take such security in support of a CBILS facility;
Self-certification – Businesses can self-certify they have been impacted by COVID-19; and
Retrospective changes – these changes should be retrospectively applied by lenders for any CBILS facilities offered since 23 March 2020. For any commercial (non-CBILS) facilities offered since the same date, providing the borrower meets the CBILS eligibility criteria, lenders have been asked to bring these facilities onto CBILS wherever possible and changes retrospectively applied as necessary.
From our discussions with lenders, a large number of these that are not in the original batch of 40 accredited participants, are now in the process of applying for membership to the scheme. These include “debt funds” with interesting debt products providing an alternative to the options available from the high street banks.
How we can help
Even with those welcomed adjustments, COVID-19 emergency loans are still a lot less straight forward to secure than has been presented in the media. Successful applications for a CBILS loan will require a strong business case set out in a detailed business plan supported by a robust and fully integrated monthly phased profit, cashflow and balance sheet forecast demonstrating the viability of the business.
The increasing number of lenders participating in the scheme should open up the choice of debt products available and it is important to understand the entire landscape of lenders in selecting the optimal debt product for individual requirements.
If you want to discuss how we can assist you in the preparation of you CBILS application, please do not hesitate to contact us.
Whilst we welcomed the introduction of the Coronavirus Business Interruption Loan Scheme (CBILS) to provide funding support to businesses during the COVID-19 crisis, we were concerned at the accessibility of the scheme for all SMEs requiring assistance.
Initially to qualify for CBILS, annual turnover could not exceed £45million and the maximum loan was capped at £5million although last week it was announced that these limits were increasing to £500million and £25million respectively.
Furthermore, the scheme initially appeared onerous in respect of the personal guarantee requirements from business owners. However we are delighted that this has been relaxed with the following amendments to the scheme:
New Features to CBILS
Personal guarantees for facilities above £250,000 – Personal guarantees may still be required, at a lender’s discretion, but recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied (i.e. PG’s are limited to the portion of the loan not covered by the Government’s 80% commitment);
Principal Private Residence (PPR) – PPR cannot be taken as security to support a personal guarantee or as security for a CBIL backed facility;
Interest and fees paid by Government for 12 months – The Government will make a Business Interruption Payment to cover the first 12 months of interest payments. Banks have been instructed to waive arrangement fees and this has now been extended to cover early settlement fees so that that there is no cost to the business at all if the loan is repaid within 12 months;
No personal guarantees for facilities under £250,000– Personal guarantees of any form cannot be taken under the scheme for any facilities below £250,000;
Security – For all facilities, including those over £250,000, CBILS can now support lending to smaller businesses even where a lender considers there to be sufficient security, making more smaller businesses eligible to receive the business interruption payment. However, where there is sufficient security available, it is likely that the lender will take such security in support of a CBILS facility;
Self-certification – Businesses can self-certify they have been impacted by COVID-19; and
Retrospective changes – these changes should be retrospectively applied by lenders for any CBILS facilities offered since 23 March 2020. For any commercial (non-CBILS) facilities offered since the same date, providing the borrower meets the CBILS eligibility criteria, lenders have been asked to bring these facilities onto CBILS wherever possible and changes retrospectively applied as necessary.
From our discussions with lenders, a large number of these that are not in the original batch of 40 accredited participants, are now in the process of applying for membership to the scheme. These include “debt funds” with interesting debt products providing an alternative to the options available from the high street banks.
How we can help
Even with those welcomed adjustments, COVID-19 emergency loans are still a lot less straight forward to secure than has been presented in the media. Successful applications for a CBILS loan will require a strong business case set out in a detailed business plan supported by a robust and fully integrated monthly phased profit, cashflow and balance sheet forecast demonstrating the viability of the business.
The increasing number of lenders participating in the scheme should open up the choice of debt products available and it is important to understand the entire landscape of lenders in selecting the optimal debt product for individual requirements.
If you want to discuss how we can assist you in the preparation of you CBILS application, please do not hesitate to contact us.
