The Government has launched a number of schemes designed to support charities and businesses in these difficult times.
Working with our long term partner, Chatham Financial, Allia C&C has already advised a number of charities on successfully taking advantage of these schemes to help them continue to deliver their social impact.
We can help you:
- assess the right scheme for your charity
- negotiate with lenders to get the best terms
- navigate the process and get the deal done.
Here’s a summary of the options available.
A £750m package of grants for frontline charities.
On 8 April the Government announced that charities across the UK will receive a £750 million package of support to ensure they can continue their vital work during the coronavirus outbreak.
£360 million of this will be directly allocated by Government departments to charities providing key services and supporting vulnerable people during the crisis.
An additional £370 million will be available for small and medium-sized charities, including through a grant to the National Lottery Community Fund for those in England, to support organisations at the heart of local communities which are making a big difference during the outbreak, including those delivering food, essential medicines and providing financial advice.
Coronavirus Large Business Interruption Loan Scheme (CLBILS)
This scheme is available for all businesses with an annual turnover in excess of £45million.
It offers loans and overdrafts for periods of up to 3 years. The amounts will need to reflect the liquidity needs for the next 12 months and are capped at:
- up to £25m for businesses with turnover under £250m
- up to £50m for businesses with turnover over £250m
Applications will need to be made through a bank which will be taking the first 20% of the risk on the loan – with the Government taking losses above this.
Banks will be making all their normal credit assessments when granting the loans, which will be subject to all their normal financial covenants and security requirements. The loans will rank pari-passu with all other lending in the business.
Pricing is subject to negotiation but should reflect the benefit to the bank of receiving a Government Guarantee on 80% of the loan.
The facility is available until 20th October 2020
The Coronavirus Business Interruption Loan Scheme (CBILS)
This scheme is available to all businesses with a turnover of less than £45million.
It offers loans and overdrafts for periods of up to 6 years on term loans and asset finance and up to 3 years for overdrafts and invoice financing facilities. Amounts vary between £0.25 – £5.0m dependent on credit and need.
The scheme covers all lender fees together with the first 12 months of interest. In some cases, early repayment charges can also be waived.
All applications need to be made through a bank – with currently around 50 accredited lenders.
A Resilience and Recovery Loan Fund has been established specifically for charities with an initial £25m investment to offer loans of up to £500k.
The borrower needs to have been in operation for at least 3 years, so start ups do not qualify. It also needs to be assessed as a credit worthy institution before account is taken of the impact of the Coronavirus pandemic.
All the normal requirements for security and financial covenants apply, with the pricing of the loan set individually by the lender.
The scheme has the same initial maturity date as the CLBILS.
The COVID Corporate Finance Facility (CCFF)
This scheme is available to all businesses which make a material contribution to the UK economy that are considered to be investment grade.
- a 12 month commercial paper facility (subject to possible further extension by the Government) for drawdowns on periods of between 1 week and 12 months, that can extend beyond the maturity of the facility– hence for a total life of up to 23 months;
- unsecured debt with no financial covenants and no fees for the use of the facility, where the commercial paper is purchased by the Bank of England (BoE);
- a cost on the debt which is determined by the credit standing of the borrower but has a margin that varies between 0.2% and 0.6% per annum over the SONIA for the relevant period – currently 0.3% – 0.7% all in.
The size of the facility is subject to the lesser of:
- 50% of the average annual turnover of the business over the last 3 years; or
- an amount that reflects the impact the COVID-19 lockdown is expected to have on the liquidity of the business.
Applications to qualify for the facility need to be made directly to the BoE using the form provided on its web-site. To activate the facility, borrowers will then need enter into a commercial paper agreement with a bank to act on its behalf in making the sales of the commercial paper to the BoE and to attest to the investment grade standing of the borrower.
As an alternative to a statement from a bank on credit standing, the credit rating agencies will provide commercial paper ratings at little or no cost using a simple analytical process which will involve no more than 3 weeks.
The scheme will additionally require the appointment of a paying agent.
The total cost of execution on the facility is unlikely to exceed £40,000 including the cost of the borrowers lawyers.
Here to help
The schemes above provide a wide range of options – and involve significant differences in cost.
Allia C&C would be pleased to provide you with help and support in accessing the programme most suitable to your needs and in helping to negotiate the best terms available.
To find out more, please get in touch.