Mid-tier market support addressed as funding gap closed

Chancellor Rishi Sunak MP’s 3 April announcement that financial support for the vital mid-tier sector is now available for businesses with up to £500m turnover should be welcomed. This is according to Duff & Phelps, the global advisor that protects, restores and maximises value for clients.

David Fleming, Managing Director, Restructuring Advisory, stated: “When assessing the government’s recent announcements, there were initially two levels of support. For small and medium-sized enterprises (SMEs) with a turnover of up to £45 million, there was the Coronavirus Business Interruption Loan (CBIL) guarantee scheme. Then the Coronavirus Corporate Financing Facility (CFF) for triple A credit rated large enterprises, there was a promise to buy unlimited short-term IOUs.

“However, there was a huge gap between those businesses with a turnover of up to £45 million and the listed multi-billion-pound, credit worthy corporate giants. 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 Loan Scheme (CLBILS), ensuring a government guarantee of 80% to enable loans of up to £25 million for firms with a turnover of between £45 million and £500 million, 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 the Coronavirus Business Interruption Loan Scheme (CBILS) to speed up access to loans for ‘viable’ small businesses.

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

Duff & Phelps has a team of experts that understand the challenges being faced, so we would urge accountancy firms and businesses experiencing challenging trading conditions in the face of COVID-19 to reach out to us.