What is CLBILS?
CLBILS is the Coronavirus Large Business Interruption Loan Scheme announced by the Chancellor on 2 April to help businesses with annual turnover exceeding £45m, during the interruption caused by the COVID-19 pandemic. It is similar to the Coronavirus Business Interruption Loan Scheme (CBILS) announced on 11 March, but aimed at larger enterprise.
CLBILS is a new scheme that can provide facilities of up to £25m for businesses with a turnover between £45m and £250m across the UK who are experiencing lost or deferred revenues, leading to disruptions to their cashflow. For businesses with annual turnover between £250m and £500m, loans have a maximum limit of £50m.
CLBILS supports a wide range of products, including term loans, revolving credit facilities, invoice finance and asset finance facilities. The scheme provides a guarantee to lenders of up to 80% of the loan amount potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’.
Am I eligible for CLBILS?
You will be eligible for the CLBILS if:
- The loan is to be used for business purposes;
- Your business is based in the UK with annual turnover over £45m and less than £500m;
- Your business generates more than 50% of its turnover from trading activity;
- The CLBILS backed facility is to be used to support primarily trading in the UK;
- You wish to borrow up to £50m, and;
- You 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.
What are the key features of CLBILS?
CLBILS guarantees facilities up to £50m available on repayment terms of up to three years. The scheme provides the lender (not the borrower) with a government- backed guarantee against 80% of the outstanding facility balance.
The guarantee potentially enables a ‘no’ credit decision from a lender to become a ‘yes’.
For facilities above £250,000, the scheme requires the lender to establish a lack or absence of security prior to businesses using CLBILS.
It’s important that you are aware that you, the borrower, will always remain 100% liable for the debt. The CLBILS guarantee is to the lender, not the borrower.
Will I be required to offer security for the loan?
For loans over £250,000 security in the form of debentures or specific charges on business assets are likely to be required. The Lender may require that this security is supplemented by Personal Guarantees. Personal Guarantees are capped at 20% of the loss, after all other forms of recovery have been exhausted.
Primary Residential Property (PPR) cannot be taken as security under the scheme.
Will my current lender offer me access to CLBILS?
Yes. You can approach your current lender who will inform you of their application process. Lenders are happy to take applications directly from their customers. Making a direct approach to a Lender without engaging an advisor will lower your costs of arranging a CLBILS loan.
Can I apply for CLBILS with another lender if my current lender refuses?
Yes. The lending decision is solely that of the Lender not that of the government or the British Business Bank. Different lenders have different risk appetite and may accept your proposal where your current lender may not. Different lenders will apply different pricing, terms and conditions to the loans, and you may wish to consider other lenders before committing to any facility agreement.
I am getting other kinds of aid to help respond to COVID-19 – can I still get a loan?
Yes. The eligibility criteria for CLBILS does not require Lenders to take into account the other forms of government support that SMEs may be benefiting from e.g. business rate reliefs or grants unrelated to the CLBIL scheme. However, we expect that lenders will look for applicants to make full use of other government support as part of their business plan.
Why is Shaw & Co charging a fee to support CLBILS applications when its free if I apply myself?
The CLBILS process is built around the framework of the CBIL Scheme for SMEs with turnover under £45m, which is in turn based on the Enterprise Finance Guarantee Scheme (EFG), both of which we have significant experience. From this experience we know that applications will not be straightforward and will be subject to each lender’s credit procedures. Despite the partial guarantee, the Lender will remain at risk for at least 20% of the loan and possibly more subject to per Lender total limits. For this reason, your application will need to meet certain standards.
Our CLBILS application support service has the following benefits:
- Right first time. We have been working with the major lenders to understand exactly what information they need to process your application. We can help you collate and represent the information your lender will require, in the format that they need so that your application can be processed quickly.
- Maximise support. We can make sure your plan demonstrably maximises the support offered by the government. We have a working knowledge of the Coronavirus Job Retention Scheme, VAT deferrals, Time to Pay arrangements, rates relief and other initiatives.
- Robust forecasts. Whilst your forecasts will always be your own, we can advise you on the revenue deferrals and cost mitigations that lenders consider reasonable and acceptable when presenting your projected cashflows as part of a robust financial model.
- Repayment plans. We can help you set out a business plan that will be acceptable to the lender to meet the repayments. In the current environment what is a sensible plan that your lender will accept? We can help.
- Negotiate security. Loans over £250,000 backed by the CLBILS will require security. We can help you negotiate the structure of this security with your lender and its interaction with existing facility providers to make sure that your exposure is minimised as far as is practicable particularly in relation to Personal Guarantees.
- Resource allocation. You may have more pressing things you need to deal with in your business that you cannot outsource. We can be the extension of your team that manages much of the CLBILS process for you.
- Funding expert support. We have already built up considerable experience in dealing with accredited lenders for emergency support. We can apply all our learnings of potential pitfalls and nuances to your requirement.
What fees will Shaw & Co charge?
We recognise that these are very stressful times for businesses, and we want to help, but we must be a viable business ourselves to do so. We are offering to help with your CLBILS proposal in return for fees as follows:
For amounts under £5m:
- For CLBILS proposals to incumbent Lenders, our Success Fee will be 1% of funds approved; which is one third (67% discount) of our normal fee for arranging loan facilities; and
- For CLBILS proposals to Lenders other than your incumbent, our Success Fee will be 2% of funds approved; which is one third (33% discount) of our normal fee for arranging loan facilities.
- For arranging a commercial solution with a non-accredited lender, our Success Fee is 3%.
For amounts over £5m:
- Our fees can be structured to your specific needs and discounts to the fees set out above for loans under £5m can be negotiated.
Fees other than a Commitment Fee set out below, our fees are fully contingent on successful loan approval.
We will ask for a Commitment Fee of 10% of the projected Success Fee. This fee must be paid in advance of commencing work on your proposal. Success Fees are reduced by Commitment Fees already paid.
Why does Shaw & Co charge a higher fee if I want to apply to a different lender?
We anticipate that the majority of businesses will prefer to work with their current Lender. We also anticipate that Lenders will prioritise their own customers. Therefore, we have minimised our fee as far as possible to accommodate the majority of cases.
However, if you wish to explore any of the other approved Lenders because:
- Your application has been denied;
- Your current Lender is unable to process your application quickly, or;
- You wish to explore alternative terms and rates
We are able to support you in doing this and have access to representatives at each of the approved Lenders. We can market the opportunity for these Lenders to provide a CLBILS facility to your business, but this takes more time and resource for which we need to charge an additional fee.
Why does Shaw & Co charge a Commitment Fee?
Our standard practice within our business is to charge a Commitment Fee. This is an exchange of value that ensures that you are committed to working with us and us with you. We will invest a significant amount of time helping you with your CLBILS business proposal and application process and we need to ensure those that we are working with meet our level of commitment to securing funds.
Is the Commitment Fee refundable?
Yes. In the event we will decline to proceed following full assessment of your business case we will refund your Commitment Fee. The Commitment Fee is otherwise non-refundable in all other circumstances excepting non-performance of our service commitment to you.
Given the high number of requests for support anticipated, we shall only move to full assessment of your business and proposal after engagement terms are agreed and the Commitment Fee is received. We may decline to proceed if following our post engagement assessment, we believe that you will not be eligible for CLBILS for a technical reason or that a borrowing proposal, despite our input, is unlikely to meet the standards required by a Lender.
Our post engagement assessment will be completed with three business days of receiving the information requested of you. Any Commitment Fee refunds will be processed within two working days.
How quick is the process from application to receiving funds?
This process is as yet untested at volume. We anticipate a three to four week application and decision process. This time frame will be determined by the resource available at the Lenders to process credit applications and the quality of the proposals put to them. Our service is designed to minimise the time to receiving funds as much as is possible by supplying the Lender what they need in the format they need straight away.
When do I pay the Success Fee?
The Success Fee is due within five days of the facility agreements being entered into by you.
If I decide to not draw down on the funds, do I need to pay the Shaw & Co Success Fee?
Yes. You need to pay our Success Fee if the loan agreements are entered into by you even if the funds are not drawn, for example by way of an undrawn Revolving Credit Facility or an overdraft. You may also choose to delay entering into loan agreements for many reasons. However, we will have dedicated significant resource in getting to approval of your facility. We will speak to you about receiving our fee in the event of a delay for genuine reasons, rather than an objection to terms, so that we can fund the resource to go on and help others.
Are there any other fees payable?
You may require support from your lawyer or your accountant in meeting the requirements of the CLBILS process. This may incur additional fees which you will need to pay. Any amount paid to Shaw & Co shall not be reduced by any other fee payable by you.
Does Shaw & Co receive any commission from Lenders or payment from the government?
No. Shaw & Co does not receive payment from any party other than its clients. We are proud of, and fiercely protect our independence so that we may advise you free of any conflict of interest.
Would you like Shaw & Co to help you apply to the CLBILS scheme?
If you would like Shaw & Co to help you with a CLBILS application, please click here.