Before offering finance through the Coronavirus Business Interruption Loan Scheme (CBILS), lenders must first seek to take security over a borrower’s available assets for repayment of the loan – the CBILS will only cover up to 80% of any shortfall. Primary residential property (or ‘Principal Private Residence’ (PPR) as it is formerly known) cannot be taken as security and this raises several questions for lenders:
- Can lenders who ordinarily take security over residential property as part of their lending still insist on this security as a condition of a CBILS loan? After all, the first requirement for using the CBILS is that the borrower satisfies the lender’s usual credit criteria.
- Do “available assets” include assets already subject to a charge and can existing chargeholders be required to give consent to further charges being given to secure a CBILS loan where they would refuse to do so in other circumstances?
- Where security is being taken over eligible real property, how should the charge be registered with the Land Registry given the restrictions under COVID-19?
The answers to these questions remain unclear. What is clear is that the Land Registry requires wet-ink signed documents to be delivered to register charges, and that executing these and other deeds and documents, and obtaining the originals to file, may prove challenging presently.
For further guidance on how you can take security over a CBILS borrower’s assets, ways to execute deeds and other security documents, please get in touch