CBILS update: Application success rate rises to 46%
According to figures released today by UK Finance, application approval rates have increased with over 16,000 approvals.
UK Finance today released their updated figures on CBILS application approval rates and it showed good news in the roll out of the scheme. An additional 9,000 loans were approved last week bringing the total amount lent to businesses to £2.8b. This marked an increase of £1.45b in the last 7 days.
Accredited CBILS lenders have received over 36,000 completed applications so far. 16,624 of these applications have been approved to date, while others are still being processed and may be approved over the coming days.
Whilst the news that the total number of approved applications has increased by almost 120 percent is good, the amount banks still falls far below the Governments original scheme value. There is still news from businesses that bank customers have had little or no response and it will be interesting to see how this figure rises over the coming week.
In other news Rishi Sunak announced a fund for loss making start ups this week with the intention of giving support to those businesses that wouldn't qualify for the scheme. Under the rules of the Future Fund the Government will issue convertible loans to innovative companies that are facing financing difficulties due to the Coronavirus outbreak.
What's the Eligibility criteria of the Future Fund?
To be eligible for a Future Fund loan a business must be an unlisted UK registered company that has raised at least £250,000 from private third party investors in previous funding rounds in the last five years and have a substantive economic presence in the UK. If the company is a member of a corporate group, only the ultimate parent company, if a UK registered company, is eligible to receive the loan.
The key point here is that the government will only invest alongside other investors at 50% of the total amount required.
The Government shall make unsecured bridge funding available alongside other private third party matched investor(s). The loan shall constitute no more than 50% of the bridge funding being provided to the company, with the remaining amount provided by matched investor(s). It is not specified whether the funds from investor must be debt or equity however in the write up it does mention that 'There shall be no cap on the amount that the matched investor(s) may loan to the company...' which may imply that it is debt only.
Term, Conversion, & Interest
Term & Repayment: If not converted earlier (see below), the loans will mature after a maximum term of three years. Interest will be payable at maturity and, subject to the conversion mechanism (see below) the company will have the option to repay accrued interest in cash.
The company will only have the right to repay the principal in cash at maturity at the option of the majority matched investors.
Conversion: The principal amount of the loans will automatically convert into the most senior class of equity on the company's next qualifying funding round at a minimum conversion discount of 20% (the 'discount rate') to the price paid by new investors in that round.
If a further funding round is completed within six months of the relevant conversion event, the lenders will be entitled to convert their shares into the senior class of shares of the company in issue post that round. The company may choose to repay the accrued interest in cash.
On a non-qualifying funding round, at the election of the holders of a majority of the principal amount held by the matched investors, the bridge funding will convert into equity at the discount rate to the price set by that funding round.
A "qualifying funding round" will take place where the company raises an amount in equity capital, excluding any shares issued on conversion of the bridge funding or to employees/consultants, on exercise of any share options.
The convertible loans will also be convertible upon a sale of an IPO, if not converted or repaid beforehand.
Interest: The Future Fund loans will be unsecured and have a minimum interest rate of 8% per annum (the rate may be higher if agreed between the company and the matched investors).
Negative pledge: The company will not be permitted to incur any debt that is senior to the loan, other than any bona fide senior indebtedness from a person that is not an existing shareholder or matched investor.
Transfer rights: The government will be entitled to transfer the loan and, following conversion of the loan, any of its shares without restriction to an institutional investor acquiring a portfolio of the government’s interest in at least 10 companies owned in respect of the Future Fund.
If you would like to discuss any funding requirement do not hesitate to get in touch at email@example.com