Business Recovery Loan. Who’s lending?

Good question. And businesses are queuing to access this supposedly available form of lending

And the answer? Well dont believe drivel from “brokers” boasting about “thousands of deals” on linkedin (who believes them anyway?) because this is looking still born

I’ve spoken to very good contacts at three major independents and also major banks. Also have feedback through that network to most of the major lenders

The difficulties between the British Business Bank and the lenders are still on going. Questions are being fired back and forth and there is some bafflement amongst lenders why this is not being resolved. As I understand it, one major bank has made one largish lend under the scheme but there is very little activity elsewhere. If any

The more machiavellian theory is whether there is any real intention for this scheme to actually take off? A deliberate muddying of the waters until the lenders lose the will to live? All past governments have been adept at promoting schemes with good intentions but no practicality. Headlines rather than substance and why would this government be any different?

Also the list of lenders is curiously limited. As i’ve noted before, there are virtually no “fin-techs” although the reasons (unhappiness with their CBILs methods of lending and fear of another Greensil collapse) for that are probably unrelated to this current muddle

Are the insurers right to be blamed for Greensil’s collapse?

Last week, Lex Greensil explicitly blamed the Credit insurers for the collapse of his business and yes it is true that the withdrawal of insurance was the first domino to topple but surely he’s aware that insurance is discretionary?

The other side of the argument is that credit or trade insurance withdrawn without any warning is irresponsible and thoughtless. Its fair to say that it probably damages the insurance industry’s reputation, so was Greensil right to complain?

This excellent piece gives some background and this line is striking. It may be that the insurance industry was spooked but as we will see, perhaps rightly so

For at least four months, Greensill has used a well-known broker, Marsh, to try to find alternative insurers, court papers show. None has been willing to step in

Why was this? Well it would appear that the existing underwriter had been “operating beyond authority” and been subsequently dismissed. In effect, he/she had been authorising what might be described as “illicit insurance”

The obvious question. that follows is what would someone put their whole career at risk by doing so?

We can speculate away but as with the alleged “fresh air” invoicing designed to prop up the failing Gupta enterprise, the layers are being stripped away to reveal what appears to be a rather seedy operation

Business Recovery Loan scheme. The details

Here we go

Up to £10m facility per business: The maximum amount of a facility provided under the scheme is £10m per business (maximum £30m per group). Minimum facility sizes vary, starting at £25,050 for term loans.

Term length: Term loans are available for up to six years.

Interest and fees to be paid by the borrower from the outset: Businesses are required to meet the costs of interest payments and any fees associated with the RLS facility.

Access to multiple Covid-19 schemes: Businesses that have taken out a CBILS, CLBILS or BBLS facility are able to access the new scheme although the amount they have borrowed under a previous scheme may in certain circumstances limit the amount they may borrow under RLS.

Personal Guarantees: Personal guarantees are not permitted for facilities of £250,000 or less. Above £250,000 the maximum amount that can be covered under RLS is capped at a maximum of 20% of the outstanding balance of the RLS facility after the proceeds of business assets have been applied. No personal guarantees can be held over Principal Private Residences.

Guarantee to the Lender: The scheme provides the lender with a government-backed guarantee against the outstanding balance of the facility.

The borrower always remains 100% liable for the debt.

Now Greensil/Gupta gets serious

As i’ve said before, its not too often that our sector is front page news but now the Serious Fraud Squad are involved in in the Greensil/Gupta saga and its would appear that “fresh air” invoicing is top of the agenda.

Remarkably the claim is that Greensil were “not obliged” to check the invoices. Really? Given the amounts involved, thats stretching a point but as I have alluded to before, if there is found to be collusion between Greensil and Gupta, then this is really going to be quite some story. Of course we do not know but it clear that Greensil had a interest in ensuring that Gupta received access to cash without which they would have collapsed and it was possibly a rather desperate interest.

New lead. Can anyone assist?

Genuine as published by Private Eye and elsewhere today

Would anyone wish to assist with enforcement?

I know there might be difficulties with entry and i’m not sure all of 10 Downing street’s assets could be seized but im sure the creditor would appreciate any efforts

“Potentially criminal” Greensil

It would appear that the Greensil saga is going to quickly become more serious.

As alluded to in my previous posts, it would appear that Credit Suisse could well have lost a considerable sum through backing allegedly fraudulent invoices. Certainly the initial indications from the administrators would suggest that is the case and now the FCA are investigating

On a more comical note, Lex Greensil is now blaming the insurers for the collapse of his business.Talk about taking responsibility.

He also suggests that “taking real time information from corporate accounts for credit decisions” is “absolutely the future”

Not if the accounts are riddled with fake invoices…

A plan for buying a business

From time to time I receive a number of leads from parties looking to raise finance to purchase a business. This has been particularly so in the past year where the business buy/sell market has been buoyant and lending has received a boost from CBILs. It comes as a surprise to many that it is possible to buy a decent business without putting in any of your own cash. A few elements need to stack up and its essential that the right lender is engaged, which is where I come in of course

Lenders have very different criteria for MBIs (management “buy ins”) and their flexibility is dependent on a wide range of factors. The arrangements do have the added complication of not just ensuring the finance but also completing the transaction at the right price. I frequently find myself advising clients on the suitability of the business they are seeking to purchase and the value of the proposal. This is an area I will be covering in more detail

The sums have to add up of course but there is one factor which, whilst always appreciating its importance, comes to the fore time and time again. The suitability of the buyer

Lenders always need to know that they will get paid and thats dependent on the future viability of the business which is in turn dependent on the quality of the buyer

Quality can be judged on many factors. Experience of sector is certainly a positive but more important is an actual plan. Unfortunately too few buyers understand the importance of the Business Plan.

A written business plan is essential. Its does not have to be War and Peace and in fact brevity is a positive but the other side of the coin is that it has to be considerably more than a back of fag packet.

A cash flow forecast is key but also indications of where the new owner can add value and save costs. Too often I’ve witnessed Business Plans that made little sense or were simply illogical. Even what might be considered minor issues, such as poor grammar, can be vital.

The lender also has to “buy in” to personality of the proposed buyer and whilst that can be very subjective as well as being dependent on chemistry, there is often a basic pattern.

A text book example is a client of mine buyer of two substantial businesses in the electrical sector currently who has been textbook in his approach and has won considerable confidence from the lender.

In fact we never stop learning from these situations and it has emphasised the template needed to succeed.

I believe my added value is not just in terms of sourcing finance but also preparing the right profile as well as finding the best options for the prospective buyer

Business Recovery loans. A flop?

It would appear that as well as most of the banks finding the terms of the BRL confusing and contradictory, application from borrowers have been extremely sluggish. Here are some points from the linked article

• Only 18 lenders are accredited compared with around 100 for CBILs.
• “Extensive” credit history checks are alienating applicants
• Interest rates can be up to 15% apr (although that was the case with CBILs, if not widely applied)
• Personal Guarantees are required

The whole scheme risks being virtually still born and personally I believe that it was designed to be little more than government window dressing.

All of which makes some of the online claims from various parties even more galling. Brokers masquerading as lenders giving the impression a brief call it is all it would take to get a lump low interest sum in your bank account alongside other frankly unbelievable claims

Another PTP crash under investigation

It would be cruel to say that this is the face of PTP lending on a number of counts but unfortunately he’s in the news

Im not too aware of the lender The House Crowd given that they are in property and also based in another part of the country but it would appear that again we are looking at more unfortunate publicity in a sector which is attracting more than its fair share

I cannot link the latest story in the Times but it would appear that the CEO took out rather in appropriate loans from the business

This always baffles me. Do they really believe that Administrators will simply miss such a transaction?

Either way, I am a strong supporter of PTP lending simply because, at the very least, in my sector it’s brought about innovation and creativity which had been seriously lacking. Its also given a wider range of options for my clients and the opportunity for far more tailor made suitable solutions rather than being dumped with a take its or leave it “factoring” arrangement

But the sector is inviting scrutiny and needs to quickly clean up its act

Just phone

Are we seeing the gradual demise of video calling?

I may be mistaken, but I overheard a news item this morning claiming that even the owner of Zoom as had enough. Either way the sentiments detailed here will resonate with most

Video calls are generally awful. Returning to face to face meetings is already paying dividends for me, simply because the chemistry and trust is generated. So vital when. dealing with new clients but also for businesses that genuinely require team work (isn’t that all of them?|)

Zoom/teams calls will also always be associated strongly with what has been a horrible year and that reason alone will kill the function for many. Who wants constant reminders of 2020?

Im also finding now that the good old telephone is making something of a comeback. I had a very nice exchange with the head of a very decent lender last week where he tentatively suggested a teams call but after a bit of “do we have to?” he breathed a big sigh of relief and quickly we reverted to a good productive call

And it has been proven that people talk more openly on the phone rather than sitting like a waxwork in front of the unforgiving camera