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I hope everyone received the detailed Q&A summary for the Job Retention Scheme yesterday, which still remains a key provision of most interest from the government measures introduced. If you didn’t receive this, please contact us so that can be sent on. As the summary showed, and as we have been discussing with many clients, the details on the working of this scheme are still not fully clear, and so further details will be provided when more detail is released. The cashflow effects of paying staff and waiting for repayment of money under the Job Retention Scheme is a real issue for many businesses.

As we have said previously, and also have been discussing with clients, further details on the support available for the self-employed has not been released yet. However, this is expected today so we will provide details and implications when this is available. We will, of course, need to assess whether this provides any further support for the owners of their own businesses who may utilise the Job Retention Scheme for their staff, but which does not provide much support for their own required drawings.

Further details are starting to come out in relation to the Coronavirus Business Interruption Loan Scheme (CBILS). This is something we can specifically assist with if you are considering this route. We have vast experience in raising finance for clients, and this scheme is, in essence, no different than any other debt fund raising process.

You should be aware that if a business meets lenders normal lending requirements for a fully commercial loan or other facility, these need to be utilised first. This may actually mean that the scheme is not as widely used as maybe first thought. As with any other debt funding, the lender will still be assessing longer term viability. It should be remembered that this is debt finance that puts additional debt into the business, and so further gears up the business. It is not a grant, and is not free money.

Information coming from initial views of some mainstream banks are that;
• If directors have personal assets e.g. property including their own home, they would consider lending on a normal basis against the security of the personal assets first.
• If you apply under the Business Interruption Loan Scheme for loans of up to £100k a personal guarantee would not necessarily be asked for, although this will be considered on a case by case basis.
• Banks expect the process from application to drawdown of loan to take minimum four weeks (so in reality probably nearer six weeks). This is a normal timescale for such a process so there is no shortcut process involved. They will consider giving an overdraft facility once the loan is agreed pending it drawing.

Some further details are provided below. Please contact us should you wish to consider this further for your business.

Finally, once again, please remember we are fully available to discuss any aspect affecting your business or personal finances.

Andrew Baggott
Managing Partner

 

CBILS is available through the British Business Bank’s 40+ accredited lenders, which are listed on the British Business Bank website. Note: Not every accredited lender can provide every type of finance listed.

In the first instance, businesses should approach their own provider – ideally via the lender’s website and speak to their accountant. They may also consider approaching other lenders if they are unable to access the finance they need. Decision-making on whether you are eligible for CBILS is fully delegated to the 40+ accredited CBILS lenders. These lenders range from high-street banks, to challenger banks, asset-based lenders and smaller specialist local lenders. If the accredited lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so. It is important that you get advice on your requirements and current business position.
CBILS supports a wide range of business finance facilities, including:
• Term Loans
• Overdrafts
• Asset Finance
• Invoice Finance

The scheme is designed to support smaller businesses (SMEs) who don’t meet a lender’s normal lending requirements for a fully commercial loan or other facility, but who are considered viable in the longer-term. To be eligible for a facility under CBILS, your business must:
• Be UK based in its business activity with annual turnover or no more than £45m
• Have a borrowing proposal which, were it not for the COVID-19 pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable your business to trade out of any short-to-medium term difficulty
• Smaller businesses from any sector can apply for the full amount of the facility.

Note: Exclusions: Banks, Building Societies, Insurers and Reinsurers (but not insurance brokers); The public sector including state funded primary and secondary schools; employer, professional, religious or political membership organisation or trade unions.

Aspects to consider, which will need to be outlined to the lender as part of the proposition, are;

• Amount – what is this based on? What assumptions have been made on trading?
• Purpose – is this expected to be needed to cover a short terms position, or would be needed for an extended period after the Pandemic is resolved? Are there specific uses of the funds?
• Viability – what measures have been taken to ensure the longer-term viability of the business?
• Financial information – likely to need last 2 years full accounts, more recent management accounts, and monthly integrated cashflow, profit and loss and balance sheet forecasts

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Clarke Nicklin House, Brooks Drive, Cheadle Royal Business Park, Cheadle, Cheshire, SK8 3TD. Registered Number OC309225.
The firm is registered to carry on audit work in the UK & Ireland. Details about our audit registration can be viewed at www.auditregister.org.uk under reference number C001178544. The professional rules applicable are the Audit Regulations and Guidance which can be found at www.icaew.com/regulations, and the International Standards on Auditing (UK and Ireland) which can be found at www.frc.org.uk/apb/publications/isa.cfm.