Legal development

British Business Bank ENABLE Guarantee programme

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    A first for the Programme

    There was an announcement from ThinCats and Citi last month, that  ThinCats will provide up to £300 million additional funding for UK businesses through British Business Bank’s ENABLE Guarantee programme (Programme). This is the first transaction under the Programme from an alternative lender with a bank as a senior funder, which is significant for two reasons:

    • While the Programme has been around since March 2015, it wasn't until May 2019 when the British Business Bank (BBB) opened the Programme to asset finance and asset-based lending providers, as well as certain other categories of lender, like ThinCats.
    • Under an ENABLE Guarantee, the UK Government takes on a portion of the risk on a portfolio of loans to smaller businesses, in return for a fee. When working with non-bank financial institutions, this typically aligns with any senior funder, such as Citi in this case.

    Renewed interest

    The announcement reflects what we're seeing as renewed interest in the Programme, which had seen over £900 million worth of live portfolios committed by the BBB by April 2019. Whilst this doesn't compare with the scale of the government's COVID 19 emergency loan schemes (which saw almost £80bn in value of facilities approved across CBILS, CLBILS and BBLS by the time those schemes closed), perhaps it was the success of those schemes which has encouraged lenders to look again at the Programme. Indeed ThinCats was accredited to the recovery loan scheme (seen as the successor scheme) in July 2021, before it returned to the BBB. So is it time for another look at the Programme?

    A refresher

    The Programme is designed to encourage banks and non-bank financial institutions to unlock more lending to smaller businesses (SMEs) by reducing the amount of capital or junior funding required for such lending. Participating institutions are incentivised by a government-backed portfolio guarantee to cover a portion of a designated lending portfolio’s net credit losses in excess of an agreed ‘first loss’ threshold, which they receive in exchange for a fee.

    Some of the key features of the Programme are summarised in the table below. We, at Ashurst, see significant benefits of the programme for the right type of lenders, looking to increase their financing of UK-based small and medium-sized enterprises.

    The Guarantee
    • Banks will benefit from a zero (for standardised banks) and close to zero (for IRB banks) risk-weighted HM Government guarantee (Guarantee).
    • The Guarantee covers a fixed percentage of credit losses in excess of an agreed first loss threshold on the portfolio originated under the Programme.
    Eligible Debt
    • Debt finance instruments, such as term lending, receivables financing, supply chain financing, trade finance and asset finance.
    • Additional risk-related parameters may apply.
    Eligible Applicants
    • All UK incorporated companies (and UK branches of overseas resident banks, asset and asset-based finance providers and direct lending fund) that provide debt finance, or intend to provide debt finance, to viable SMEs operating in the UK.
    • Applicants must be able to demonstrate that they make a material contribution to economic activity in the UK.

    With special thanks to Sarah Curry and Matthew Sharpe for their contribution.

    Get in touch

    At Ashurst, we are experienced in advising clients on BBB schemes and programmes across the board. If you would like to know more, please reach out to Lee Doyle or your usual Ashurst contacts.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.
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