Government measures in key jurisdictions 5th edition - Flipbook - Page 153
United Kingdom
Contributor: Farrer & Co
Loans and
financial
support
Has the
government put
in place any new
bank funding
schemes?
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
Lending is available under five new schemes that have been introduced in the UK:
• 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. The BoE
publishes the names of businesses with outstanding commercial paper issued into the
CCFF and the amount outstanding. Throughout the pandemic, the CCFF has helped
several eligible businesses bridge Covid-19 related temporary disruption to their cash
flows. As indicated by the BoE in March 2020, the CCFF was only intended to operate for
an initial period of 12 months. In line with that time frame, and in light of the market
conditions and usage patterns at that time, on 22 September 2020 the BoE and HM
Treasury gave six months’ notice of the withdrawal of the CCFF and announced that the
CCFF would close for new purchases from issuers with effect from 23 March 2021. This
means the CCFF will make no new purchases of commercial paper after 22 March 2021.
The CCFF also closed to new applications from counterparties and issuers looking to
become eligible on 31 December 2020. Eligible issuers that were already signed up to the
CCFF at 31 December 2020 will continue to be able to issue new commercial paper until
closure of the CCFF.
•
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. CBILS was
initially intended to run for six months from 23 March 2020 to 30 September 2020.
•
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
borrowing more than £50 million through CLBILS will have restrictions on payment of
dividends, senior pay and share buybacks during the period of the loan, including a ban on
dividend payments and cash bonuses, except for where they were previously agreed.
CLBILS was initially intended to run for six months from 23 March 2020 to 30 September
2020.
•
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). BBLS was initially
intended to run until 4 November 2020 with the possibility of being extended by the
Government should circumstances warrant 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. Those businesses must have previously raised
£250,000 from private investors in the previous five years. The Government announced on
30 June 2020 that the FF’s eligibility criteria was expanded to accommodate businesses
that contribute significantly to the UK economy, but do not have their parent company
based in the UK because they participated in a non-UK based accelerator programme. These
changes allow a wider number of suitable companies to apply, while maintaining scheme
protections against fraud and abuse and ensuring that the Future Fund continues to support
economic activity in the UK. There are certain restrictions on use of FF proceeds, including
limitations on use for repayment of dividends, bonuses and advisory fees in connection with
the FF. The FF was initially intended to run until the end of September 2020 with the
possibility of being extended by the Government should circumstances warrant it.
Government measures in key jurisdictions
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