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How private equity backed businesses can benefit from CBILS

24th Jul 2020   ·   The ThinCats Team   ·   Insights

When we recently asked more than 100 business finance advisers what they would do to improve the Coronavirus Business Interruption Loan Scheme (CBILS) a significant number mentioned that private equity backed businesses should be included, highlighting a potential misconception.

PE backed businesses are eligible, however, some may fall foul of the “undertaking in difficulty” definition relating to accumulated losses being more than 50% of subscribed share capital. This can exclude some high growth businesses, although it does not apply if the business is less than three years old or, from 30 July, if the business has less than 50 employees and has an annual turnover less than £9 million.  The accounting treatment of instruments such as loan notes in the calculation of share capital can also have an impact on whether a business is eligible.

From our experience funding existing customers with CBILS loans – and more recently new borrowers – we are able to support PE backed businesses in several ways, summarised below.

Main uses for CBILS by private equity backed businesses:

Purpose CBILS Eligibility
Acquisitions

Acquisitions of businesses by existing portfolio companies are permitted, but using CBILS funding to acquire new portfolio companies is not permitted

Liquidity/ Working Capital

Permitted for funding existing portfolio companies

Refinancing/ Debt Structuring

Includes:

  • Existing portfolio companies refinancing from current lender to new CBILS lender to benefit from new terms and 12 month interest free period 
  • Due vendor loan notes and deferred consideration payments

As an alternative lender focused on mid-sized businesses we provide CBILS loans from £1m-£5m. We have a specialist team focused on PE backed businesses who can discuss eligibility and funding issues. For contact details select “Private Equity” as the sector in this link

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