New government measure fills ‘vital’ mid-tier funding gap

Business advisory experts have heralded the government’s support for the ‘mid-tier’ market during the pandemic.

Chancellor Rishi Sunak initially unveiled the coronavirus business interruption loan (CIBIL) guarantee scheme for small- and medium-sized enterprises (SMEs) with a turnover of up to £45m and the coronavirus corporate financing facility (CFF) for triple A credit rated large enterprises.

This left a funding gap for SMEs with an annual turnover higher than £45m but were too small to be eligible for the CFF.

However, Sunak has now introduced the coronavirus large business interruption scheme (CLBILS), which will offer loans of up to £25m to firms with an annual turnover of between £45m and £500m, which come with a government guarantee of 80 per cent.

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“There was a huge gap between those businesses with a turnover of up to £45m and the listed multi-billion-pound, credit worthy corporate giants,” said David Fleming, managing director, restructuring advisory at Duff & Phelps.

“The critical mid-tier UK corporate sector looked like it would fall between two stools.

“This new initiative will see the introduction of  the coronavirus large business interruption scheme (CLBILS), ensuring a government guarantee of 80 per cent to enable loans of up to £25m, for firms with a turnover of between £45m and £500m, thus addressing what we believed was a huge funding hole for the vital mid-tier market in the UK.”

The government also announced a ban on banks demanding personal guarantees on loans under £250,000 and a major expansion of CBILS to speed up access to loans for ‘viable’ small businesses.

“Since the outbreak of Covid-19, we are continuing to assist companies with strategies in avoid insolvency,” Fleming said.

“This could be help with time to pay arrangements with HMRC, the coronavirus business payments support service or help and guidance on the furloughing of staff and the coronavirus job retention scheme.”

“The challenge now for government is the speed at which many of these schemes are implemented, and how they reach UK businesses facing imminent cash flow difficulties.”

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