Launched on 6th April, the aim of the Recovery Loan Scheme is to create the next stage in the funding market; providing continued support to businesses impacted by Covid-19 as they prepare for the reduction in restrictions and return to trading. There are some key differences from the previous schemes, for starters the BIP (Business Interruption Payment) is gone – the element that covered interest and fees in the first 12 months.
Here’s what we know about these loans so far:
You can borrow from £25,001 to £10,000,000 over six years
There’s no limit based on your turnover (unlike CBILS)
Eligibility isn’t affected if you already have a government-backed loan
Scheme will run to 31st December 2021
Very early feedback on the Recovery Loan Scheme is that it is focused more on future plans and less around historic serviceability from 2019. This is a significant change but time will tell what it means in practice. For many sectors and businesses working off 2019’s financial position has always been redundant so looking at future plans can only be beneficial. We’ll be staying close to this throughout and keeping you updated – talk to us early as this will hinge on being, as ever, the right fit for the right circumstance to the right funding option/partner at the right time.
There is only a small number of accredited lenders currently on the panel, but much like CBILS, we expect this number to increase over the coming weeks. Feedback from some funders is they’re holding back until May and June to launch. This just allows them to reset and reorganise around the new scheme, and the changes in criteria in line with the above.
The Recovery Loan Scheme comes on top of the Super Deduction announced as part of the Budget. For two years from April 2021, a company’s investments in plant and machinery will qualify for a 130% capital allowance deduction, providing 25p off company tax bills for every £1 of qualifying spending on plant and machinery. The policy aims to spur post-pandemic growth and give the government more corporate profits to tax come 2023.
Looking at the detail as we stand, utilising Hire Purchase agreements to invest in new plant and machinery complies with the scheme. The treasury have clearly identified the longer term impact of the pandemic being stalled business investment. This scheme looks to redress this, in the hope of investment over the 2 year period leads to taxable profits in the years to come.
With the 2 schemes running, now is clearly the time to consider future plans. How can this help your business deliver on its plans? If you have any questions, contact me on the details below or via our contact form.
As we begin to emerge from what is hopefully our last national lockdown, and see the light at the end of this pandemic tunnel, will the funding world be going back to ‘normal’ as we knew it?
It’s been just over a year now since the word ‘normal’ became the most fluid in the English dictionary. During this time we’ve all had to adjust to several new ‘norms’, not only in our day to day lives, but also in our professional ones. The world of funding was no exception, with the government announcing schemes such as Bounce Back (BBLS) and the Coronavirus Business Interruption Loan (CBILS), as well as making words like ‘furlough’, previously new to most of us, seem very familiar and, well, normal.
Although the government’s furlough scheme has been (and continues to be) a lifeline to many businesses, it’s BBLS, and in particular CBILS, which have played a key role in the funding landscape throughout this pandemic.
Initially, the mainstream banks were given the unenviable task to deliver these loans without notice, and it must be said, worked hard to do what they could in very difficult circumstances. Following this, the independent market was able to gain accreditation, and CBILS backed lending started to appear in a multitude of shapes and sizes. Taking the form of asset finance, term loans, invoice finance or facility top-ups, CBILs helped maintain liquidity in the market and became a ‘normal’ way to structure a facility.
CBILS, however, has now come to an end and been replaced with the government’s new Recovery Loan. While the 80% guarantee from the government is still present in the new scheme, the key benefit of one years interest covered by the Business Interruption Payment (BIP), and in most cases a years capital repayment holiday is no longer a feature. And therefore, the debt is fully serviceable from drawdown. The Recovery Loan scheme will no doubt be a key component of the funding landscape over the coming months. But without the repayment holiday, could it also signify a return to traditional funding? Or in the context of this article, will we return to the old normal or continue down fresh, new, innovative paths? To help answer that, we need only look at the changing face of the funding landscape in recent months. We’ve seen banks jettison their smaller factoring books and others exit the invoice finance market all together, some lenders have restructured themselves in order to ‘rightsize’ the business and established lenders have tried to compete in the unsecured market only to fail. In and amongst all of this noise and repositioning, we’ve also seen the emergence of new funders break into the mainstream with products which offer quick, flexible funding solutions based solely on the strength of the people, project, or security. We’ve seen a growing appetite in the unsecured growth funding space whilst some of the traditional funders have broadened their offering as they look to gain a competitive edge in the market. Add into the mix the growing number of FinTechs which are now an ever-present disrupting force, whom will in all probability come out of the pandemic stronger than when they went in.
With all of this movement it may be fair to say that, in a funding context at least, ‘normal’ could be a thing of the past. Although there will always be a place for traditional forms of funding and the institutions which provide them, the market in general seems to be changing at a rate of knots. This is certainly not bad news for businesses, whom will have more options than ever as funders strive to provide innovative solutions in this space. However, they will likely require more guidance when exploring funding options to help navigate an ever-evolving market.
It will be interesting to see how the funding market, which for the last 12 months has arguably been over reliant on CBILS, will adjust and react as the country emerges from lockdown. Further, what part the aforementioned Recovery Loan will play in this adjustment? I suspect we may be hearing quite a bit about it in the coming months.
Peter Cromarty, Managing Director at CCBS, explains more:
“This is another strategic step in our Roadmap and undoubtedly reinforces our credibility in provide structured commercial finance solutions to our clients. Whilst this will not change how we operate, it builds on the great relationships we already have with both our clients and panel of funders alike.
“In very difficult current market conditions this additional layer of approval stands us in good stead to help our business contacts in the turbulent months ahead.”
If you would like to talk to Peter and the team about a financial issue or challenge with your business, complete the contact page.
For those people who know what Crown Preference is then I guess you’ll already know what this article will mean. However, there are many that will not be aware that as of December 1st 2020, the UK Tax authorities (HMRC) will move up the creditor hierarchy in (specifically) English insolvency proceedings. As a result of the change, HMRC will rank ahead of floating charge holders and unsecured creditor claims.
This was due to commence at the beginning of the current tax year, but has been delayed until December 1st 2020, and is a return to the how things were before 2002 when the Enterprise Act was introduced.
Before 2002 HMRC were granted preferential status and needed to be paid in full before any distribution to any floating charge-holder, pension fund unsecured creditor. Post 2002 and up until December 1st the pari passu principle applied which meant that all creditors (other than those with a fixed charge) get any proceeds from an insolvency process shared rateably. This means that each creditor is entitled to a share of the proceeds corresponding to the percentage of debt owed, by the company to its creditors
Now I might be losing some people here…. is there anyone still here?
So why the need for me to tell you this? Well in these uncertain times this change in legislation has an impact on many people. I want to focus on three…
So, what should they respectively do?
Well you need to know your options and:
Look at the security structure of the business or client and ask will this have an impact?
Can the company refinance itself (much easier to be done before any insolvency process is in the offing) so that it uses business assets rather than director’s personal assets?
Seek professional advice early. Often you can get early stage professional advice free of charge
This article may not mean much to some people and that’s fine, but for those that do relate to it, it may have a significant meaning. Feel free to contact us to understand more.
The Technical Bit
As detailed in the Finance Bill 2019, following a delay from 1 April 2020, Crown Preferential status returns on 1 December 2020. For those not conversant in Insolvency Law, this simply means that in relation to any business that enters an insolvency process from 1 December 2020 onwards, HMRC’s entire claim for tax debts collected by a company on behalf of the Crown (including VAT, PAYE, CIS, Employee NIC and student loan repayments) will move up the order of priority and gain preferential status, which places the Crown liability above that of a lenders floating charge security. This in itself may not seem like a change that would concern a director, however, when combined with the fact that due to the COVID pandemic a number of business have taken advantage of the ability to defer tax payments (which are now at a historic high), this change in order of priority may well lead to the dissipation of available funds in an insolvency to the preferential creditors only, thus leaving the lender exposed (even with debenture security). If a lender has the benefit of a personal guarantee, then a director may find that a call is then made on the guarantee, thus effecting the directors personal cash position.
Graeme recently developed a guest blog post for We Sell Any Company which explores a potential fund raise for a Management Buyout (MBO) or Management Buy-in (MBI).
Essentially we need to know if the acquisition is a share purchase or an asset purchase. A share purchase will involve taking over a company i.e. taking over the legal entity which will include all of its assets, liabilities and obligations (including any inherent or historic problems). An asset purchase however, is the transfer of a specific business activity and related assets and employees.
It’s crucial that the client understands how and why the business has been valued at the agreed amount, and how and when this value is achieved. Generally, consideration is structured in the following ways;
Payment in full to the outgoing owner upon deal completion
An element of the payment to be paid upon completion with the remainder of the consideration deferred over a set period of time (deferred consideration)
An element of the payment to be paid upon completion and the business owners are financially incentivised to manage the company for a period of time with the ability to earn higher payments as set milestones are achieved (Earn Out)
Now comes the tricky bit. Does the acquiring party have the means to pay for the transaction themselves or will they need to raise finance to fund the acquisition? Typically, our clients need to raise funds to facilitate an MBO and MBI.
Remember choose a good corporate finance advisor as it can save you a lot of money in the long run!
Going into Week 5 of lockdown, we’ve pulled together a short guide and summary about using and accessing working capital during this time, which will be a key part of economic recovery for businesses in the coming months. In this guide, we have given our view on alternative sources of working capital and CBILS which we hope will be helpful.
Given the unprecedented events which have occurred over the past few weeks, we thought it would be useful to provide our contacts with a summary of the government-backed initiatives available to help support companies through this difficult period. We’ve included links to various resources, and some helpful tips to consider when contingency planning over the coming months.
Tell us about your career path so far?
I’ve spent my entire career working within financial institutions. Having started in banking I then secured a graduate scheme for an independent IF provider, working exclusively within the SME market. Following this, I spent 5 years working in corporate banking, initially as a Director of ABL in the North East and latterly heading up an International Trade team across the UK. The exposure to different business types and sectors throughout my career should stand me in great stead as I embark on my journey with CCBS.
What challenges have you encountered?
Having witnessed both sides of the banking crisis it’s become clear that in recent times we’ve seen the funding landscape change dramatically, whether that be the credit appetite displayed from the mainstream banks or the emergence of independent and alternative forms of funding. What hasn’t changed however, is the funding requirements of SME businesses. As traditional forms of finance become more difficult to obtain, clients are routinely frustrated with the lack of guidance as to what alternatives exist. I’ve now witnessed this from the side of both the funder and the customer whereby each position can be challenging.
What’s attracted you to join the team at CCBS
I’ve maintained a close relationship with the team at CCBS over the past 5 years and watched on as they’ve worked to bridge the gap between the availability of traditional forms of funding and the needs of their clients. In recent years, as the funding landscape continues to evolve, it has become increasingly evident that clients require more support to help identify and navigate solutions for their specific set of circumstances. My experience over the past 12 years should stand me in good stead when helping clients in this regard.
What does 2020 have in store?
2020 promises to be a very exciting year for us. On the back of two years of steady growth, we’re looking to continue along the same lines, and with the additional resource within company, we’ll be aiming to add value to our clients at every opportunity. We are obtaining our FCA permissions whilst working to significantly enhance our marketing capability, allowing us to maintain regular contact with our existing intermediary and client base whilst reaching out to the wider SME and professional market alike. I’m very excited to be spearheading our business development strategy and working closely with businesses and intermediaries across the region.
What is your company’s USP?
CCBS is a unique, innovative commercial finance brokerage and business consultancy. We add value by engaging with our clients in the first instance and establishing an understanding of the key drivers and motivations behind their funding requirement. Often, when we have the complete picture, it becomes clear that the end solution may not be what was first thought.
What is the best advice you have been given?
“There’s no growth in your comfort zone and no comfort in your growth zone.”
Where would you like to be in five years time?
I think the next two or three years may well be turbulent and uncertain for the business community and I would like to be part of the CCBS team that has helped its’ clients through this difficult period and ultimately supported them to achieve their business aspirations. Hopefully, in 5 years, we’ll be continuing to support our ever-expanding customer base and will have further strengthened our relationships across the professional network.
How do you like to unwind ?
I still play a bit of football although I’ve definitely lost a yard of pace as I’ve hit my mid-thirties. I also spend a lot of time at gigs, buying records and generally being one of those annoying music types.
For any enquiries please call 07719560356 or email email@example.com
The Corporate & Commercial Business Solutions Group (CCBS) will be celebrating their 5th anniversary in business this month. Michael Grahamslaw met founder Peter Cromarty to discuss the story so far and look ahead to the future.
Why did you form the business 5 years ago?
I felt that there was a gap in the market and the clients I was working with at the time were unable to find the funding they were looking for from the traditional sources. I felt that the funding landscape was changing dramatically and they needed help identifying the right solutions for their particular circumstances. To that end I established CCBS to support businesses on the client side rather than the funder side. That way we could ensure the right solution from the right lender and therefore develop longer lasting relationships which would ultimately benefit client and lender alike.
Tell us about the services you offer?
We are essentially a commercial finance brokerage and business consultancy. We can help with all forms of business finance and also assist businesses on cash management and business processes, as well as operating on a Non-Exec basis for selected clients. We launched CC Recovery Solutions (CCRS) in 2017 offering commercial debt recovery to clients and also insolvency practitioners. This is headed up by Andrea Cummings who has a wealth of experience in this sector and we have also provided outsourced credit control and receivables management services to clients so they can improve their cash position and minimise the risks to their businesses.
What has been your biggest challenge so far?
For any SME business getting the resource levels right is really difficult. You really want to maximise the opportunities whilst keeping a control on the costs and this is not easy. We’ve developed the business nicely over the last five years and been careful to bring the right people in at the right time which stands us in great stead for the next phase of development.
Tell us about your team?
Matt Lister joined the business in 2018 and we have seen a significant increase in fee income as a result. As the business develops Matt will be responsible for the ongoing client relationships, management of the funder panel and FCA compliance as Operations Director. We have a new Business Development Director starting in January to spearhead our growth in 2020 and beyond and this brings an exciting feel of pro-activity to the business. Andrea Cummings heads up CCRS and provides invaluable back office support to the wider team too.
What have been your highlights of 2019?
Amid a myriad of deals the following stand out this year: The disposal of the US division of a longstanding client and organising funding in the US of that transaction. The refinance of a large industrial estate with a new challenger bank. Refinance of property vested with Bona Vacantia (Government body dealing with businesses with assets that have been struck off). Arrangement of a syndicated asset finance facility allowing the relocation and refit of a serviced office business. Providing a revolving trade finance facility for a well known North East leisure business.
What is your focus for 2020?
We have begun our FCA authorisation process and hope to have this completed by the end of the year which will enable us to grow the business focussing on quality services and adding value to existing relationships. Organic growth will come from existing and prospective clients through our investment in our marketing capabilities, and we also look forward to continuing working with our established and growing network of intermediaries. We will look to expand our CCRS arm whilst continuing work with our strategic partners NMS Financial, Anglo Scottish Asset Finance and Reward Finance Group. All in all 2020 looks pretty exciting
For further information visit www.ccbsg.co.uk or contact Peter directly on 07715 409386
A North East fitness equipment company established by one of the original founders of Sage and a former Newcastle United physiotherapist has secured £500,000 in funding from the Leeds office of Reward Finance Group.
Speedflex supplies gyms throughout the country, and currently has 14 studios operating in the UK.
The business was established and funded by entrepreneur Graham Wylie, one of the original founders of Sage, and Paul Ferris, a former Newcastle United physiotherapist.
Unlike traditional exercise machines, Speedflex does not use weights. Instead resistance is automatically adjusted in response to the user. This means that the machine responds and adjusts the resistance, allowing users to train efficiently and at an optimum level for the individual.
The company has experienced an increase in demand for the Speedflex machine and studio concept, which has created an urgent need to manufacture a further 80 machines.
The Leeds office of Reward Finance Group has provided Speedflex with a £500,000 revolving facility to support the process, having been introduced to the company by Peter Cromarty of North East-based intermediary Corporate and Commercial Business Solutions.
Mark Simpson, group finance director of Speedflex, said: “We have had to act quickly to meet the demand for the machines and while this could have been funded from further internal investment, the process ideally suited utilising a revolving facility.
“We are therefore grateful to Reward who quickly recognised Speedflex’s potential and provided us with a flexible funding solution, which met perfectly with our requirement.
“The facility will enable us to settle stage payments, as they become due, and reduce the facility at the point of sale. It will also allow us to grow the business at the pace we require.”
Alan Sanderson, portfolio manager at Reward Finance Group, added: “The amount of orders being received for the Speedflex machines demonstrates that this new technology is a great addition to the gym market, moving forwards.
“We therefore had no hesitation in providing a flexible funding solution to help the company quickly fulfil the orders and facilitate further expansion, as demand dictates.”