Funding in the coronavirus climate

Funding in the coronavirus climate

Introduction: CBILS and beyond

Businesses across the UK and globally are facing unprecedented times. The impact of coronavirus on business is pervasive, extreme, and changeable. Businesses face disruption to normal operations, access to funding and cash is under severe stress, and complex and finely balanced decisions need to be made at speed. It is also very unclear yet when and how this will end and what the world of business will look like afterwards.

In this climate, investors and lenders are in demand like never before and face a deluge of applications from existing and potential new clients. Government has introduced a range of support options into the mix, both direct (furlough, tax deferrals etc) and indirect (for example the CBILS scheme).

How do businesses begin to navigate this maze and develop and implement an appropriate funding plan?  We explore these issues below and offer a framework for assessing and addressing need.

If you are thinking of applying for CBILS, have concerns over an existing application, or you have had an application rejected, please contact one of our experts to discuss how me may be able to assist you.  Our debt advisory team are in regular contact with the lending community and actively advising on live applications. We have a clear picture of the market, how CBILS is being deployed “on the ground”, and what lenders are looking for.

Funding in the coronavirus climate

Planning for CBILS and beyond


  • Businesses across the UK and globally are facing unprecedented times. 
  • The impact of coronavirus on business is pervasive, extreme, and changeable. 
    • Businesses face disruption to normal operations
    • Access to funding and cash is under severe stress.
    • Complex and finely balanced decisions need to be made at speed.
  • Investors and lenders are in demand like never before and face a deluge of applications from existing and potential new clients. 
  • Companies and their funders simply can’t know the full impact and how this could evolve over time. 

Navigating through the crisis

The businesses of today that survive the current crisis will be those that:

  • Focus on cash:
    • Proactive cash and working capital management will be vital.
  • Manage stakeholders well:
    • Timely communication with stakeholders and working to present the business and its plans and prospects with clarity and accuracy is critical.
  • Act quickly and decisively
    • The risk of missing an opportunity or running out of road due to a shortfall in funds is high. 
    • Decisions need to be based on the best available information.
    • Roughly and quickly right is better than slowly and precisely wrong.  

For more information please contact the team.

Responding to the crisis

This article looks at the short term priorities and issues to focus on. 

We are seeing common themes emerging as to the areas to focus on, as well as clarity on where companies are losing ground. 

cbil wheel 

Planning, planning and more planning is critical.

  • No time to get bogged down in a traditional, budget process. 
  • Instead rigorously ask the question “so what?” to get to the extremities of contingency planning.  

Think beyond plan A and instead consider plans A to E.

Scan the horizon  to review and understand the funding options available.

  • Existing lenders and investors.
  • Possible new ones.

The government has also provided an evolving range of support. 

RSM is equipped to support businesses as they adapt. 

  • We are in regular contact with funders and understand why they make the decisions they do.
  • We have a joined up advisory offering able to tailor support to clients’ needs. 
  • Our offer focuses on lender requests, forecasting and negotiation support.  

Being prepared and executing well has never been more important. 

  • Companies are competing for a limited resource: stakeholders’ time and attention.
  • Contingency planning remains key.
  • Consider a wide range of options:
    • working capital management;
    • funding options; and
    • in the worst case, restructuring.

For more information please contact the team.

Be cautious – Plans A to E

Agility and paranoia should be your watch-words when putting a plan together. 

The wider the breadth of scenarios and contingencies you plan for, for example plans A through E below, the more resilience your plans will have in the face of continued disruption and change. 


Cash management - defer and delay

  • Prepare a 3-6 month cash flow
  • Cancel direct debits / SOs
  • Divide payments: critical vs non-critical, and defer non-critical
  • HMRC deferral of VAT and PAYE
  • CJRS – furlough staff where viable
  • Sector specific Government reliefs 
  • Communication with stakeholders

Engage with existing lender (CBILS, CLBILS or otherwise)

  • Whilst the pandemic will be seen as an exceptional shock, lenders still need to assess viability of the loan
  • Relief that doesn’t involve new money will be quicker and easier
  • Assess CBILS or CLBILS eligibility 
  • Define the fully funded covenant case with no cash gaps
  • No ‘appeal’ process if existing lenders refuse to do CBILS / CLBILS

Approach new lenders

  • If lending options look difficult or insufficient, equity may be required
  • Understand the appetite of any existing Private Equity investor or parent
  • Seek alternative equity funders if unsupportive

Seek equity finance

  • If lending options look difficult or insufficient, equity may be required
  • Understand the appetite of any existing Private Equity investor or parent
  • Seek alternative equity funders if unsupportive

Restructuring options

  • May be needed to obtain new debt / equity funding
  • Consensual negotiations – structured payment plans
  • Recapitalisations and capital restructuring 
  • CVAs
  • Administrations, pre-pack administrations
  • Plan now, work back from execution timetable

For more information please contact the team.

Government loan schemes

The options keep growing 

Current market focus is on the various government –backed schemes.

These have evolved considerably in the weeks since the crisis began, with new products added and the rules changed, as the government bows to pressure from business to make the schemes more relevant and accessible.

We summarise the current position on these below.

Coronavirus Business Interruption Loan Scheme (CBILS)

The basics

How much and for whom? Up to £5m for businesses with group annual turnover less than £45m.

Key benefits: 80 per cent loss guarantee allows for lending where otherwise commercially difficult. Interest free period, capital repayment holidays, typically also no upfront fee. 

Coronavirus Large Business Interruption Loan Scheme (CLBILS)

The basics

How much and for whom? Up to £200m for businesses over £45m turnover.

Other differences to CBILS: No interest free period and no capital repayment holidays provided as standard. Up to three years maximum. Loans over £50m carry additional restrictions on dividends, buybacks, directors’ pay.

Future fund

How much and for whom? Between £125k and £5m for non-listed UK businesses that have raised at least £250k in aggregate over the last five years.

Key benefitsGovernment will buy convertible loan notes on a matched basis, i.e. private investors need to go in simultaneously. Loans will convert to equity at a discount on next ‘qualifying funding round’ or be redeemed at a premium of 100 per cent.

Potential issues? As matched investors are also required to invest via the same instrument, this means that investors relying on EIS and SEIS tax reliefs are not eligible.

Bounce back loans

The basics

How much and for whom? Up to the lower of 25% of turnover or £50k – aimed at small businesses, but no official maximum business size.

Key benefits: Businesses should be able to receive the cash rapidly “within days” after completing a simple online form. Backed by a 100 per cent government guarantee and interest free for the first year. Fixed interest rate of 2.5% and term of 6 years – designed to look like a fixed rate mortgage to make it easy to understand.  Aimed at the smallest businesses who have had difficulty getting together the information needed to access the CBILS scheme. 

What are we hearing?

Banks are trying hard to meet demand, but many have a backlog.

  • Many applications are being knocked back as the case has simply not been made clearly enough.
  • The British Business Bank and leading mainstream lenders have collectively stated that CBILS (but not CLBILS) no longer require forecasts.
  • We are finding that on the ground this is being respected for smaller loans (up to £250k), but that in practice lenders are still requiring forecasts in order to understand the business plan, size the loans, and structure the repayments.

Some structuring questions arise

What if you were already highly levered?

Banks may need to suspend covenants (e.g. leverage) for a period, during which EBITDA could fall significantly.

What will be expected from private equity or parent companies?

Likely to be a discussion about relative contribution, which might be by way of restricting running yield, or a capital injection.

How will it sit with existing debt?

More likely to be an issue for larger companies with existing debt. CLBILS loans will rank side by side with any existing senior debt (carve-outs apply).  Consent from other existing lenders likely to be required.

For more information please contact the team.

Prioritise, focus and execute well


Cash and working capital management

Working capital is a source of near-term funding for the business, and conserving cash where possible will aid financial resilience.

  • Manage your cash and working capital to maximise your position whilst maintaining relationships with key stakeholders. 
  • Lenders will expect to see discipline and proactivity in this area.
  • However, there is a natural tension with long term customer and supplier relationships and this area needs managing with care as they will be under similar pressures.

Considering alternative lenders and equity

It is prudent to consider and identify alternative options to ensure that the process benefits from the certainty afforded by having a back-up plan.

  • There will still be demand for strong credit quality businesses, even if in relative terms in the current market, and that may allow you to benefit from the price tension that competition brings.
  • The risk in this area is wasting precious management time and effort pursuing too many options that have a high delivery risk associated with them.
  • Independent advice can help you navigate an increasingly crowded market.

Restructuring options

  • Whilst unlikely to be your preferred route, considering your restructuring options at the outset ensures you maximise the options available and retain greater control over the potential worst case outcomes.
  • Being on top of these options early will help avoid them or in the worst case help soften the landing through timely action.
  • It is important to conduct a realistic review of the options that may ultimately benefit the company if funding cannot be found under the current structure such as a CVA or pre-pack administration.

Liaison and negotiation with lenders

Care needs to be given to managing your lender relationships.

  • You will need to ensure you have a transparent dialogue without damaging your relationship. 
  • Understanding their priorities and perspective through a proactive and honest dialogue will help you to position the ‘ask’ to optimise chances of success. 
  • This is a key area where timely and independent advice can help ensure you approach the discussions forewarned and on the front foot.

Cash flow forecasting 

Lenders will require you to present integrated forecasts;

  • showing the near-term cash need to help with sizing the debt; and
  • longer-term cash flow to show how the business trades through and out of the crisis. 
  • A cash flow forecast in a standard format, with integrated P&L and balance sheet will help the lender assess the credit. 
  • Lenders will expect to see the impact of near-term working capital measures and how your opening balance sheet unwinds.
  • The model will need to be tailored according to lender requirements – e.g. weekly, monthly, specific covenants and KPIs etc.

Preparation of lender request document 

Lenders will be time and attention poor:

  • Don’t given them an easy excuse to put your application in the reject pile. 
  • You need to anticipate areas of challenge and share enough information to address potential concerns, but not too much or you risk clouding the core narrative.
  • A clear and concise document setting out the business’s story will help lenders get through credit smoothly and avoid the need for too many follow-on questions.

For more information please contact the team.

Getting to grips with CBILS / CLBILS

A unique modular approach

Given the volume of requests that banks are currently facing, it is up to the borrower to make the lender’s life as easy as possible in processing the credit. Lenders need a well-structured proposal with good forecasts and a clearly explained business plan.

Many borrowers are finding it hard to get this produced at short notice.

RSM has developed an integrated offering to assist our clients. Our modular approach allows you to choose between the full integrated service and standalone areas where you most need our assistance.  

 Module What lenders are saying?   How RSM can help?
 Liaising and negotiating with your bank Lenders are sometimes making offers that are not in line with borrowers’ expectations.

We can be the point of contact with lenders to ensure that their requirements are fielded and met.

We can also have honest discussions with lenders without having an adverse impact on your working relationship with them.

 Cash flow forecasting

A robust financial model with an integrated P&L, balance sheet and cash flow is required to quantify the loan.

It would be also worth considering a number of downside sensitivities.

RSM is able to offer a focused-scope approach. 

Our models are only as complex as required to support your CBILS / CLBILS application. 

 Lender request document 

Many applications do not include sufficient detail, for example on the viability of the loan.

This often means that more work is required to process the credit.

We can help you provide the lender with all of the required information, presented succinctly and all in one place. 

This removes the need for excessive rounds of further questioning.

For more information please contact the team.

John Daly John Daly


Gregory Moreton Greg Moreton

Partner, Head of Debt Advisory

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