Senscot bridging facility: a review of the process
Because of the frequent delay in the payment of ESF claims, Senscot approached SIS (Social Investment Scotland) last October to negotiate a revolving loan facility to help with our cashflow. We intended to act as a ‘pathfinder’ on behalf of other organisations who are experiencing similar problems with ESF delays. This facility, which is now in place, has proved to be more complicated and costly than we anticipated. In response to a number of enquiries from network members, we have put together a ‘timeline’ that is designed to explain the process taken and the key issues that have arisen: We’re also inviting Scott Anderson (SIS) to comment on this.
Senscot approached SIS in the middle of October for an initial discussion regarding the possibility of a bridging loan. Further to the meeting Senscot was invited to supply SIS with the following information: Formal approval for request from Senscot Board, copy of signed Senscot constitution, copy of ESF agreement, bank details and three year cashflow projections. These were submitted to SIS on 31st October.
The SIS Credit Committee approved Senscot’s application on 11th November. SIS prepared a draft facility letter that was sent to their solicitors, Dundas and Wilson. Senscot approached DLA to act on our behalf. Although Senscot queried the need for solicitors in view of the amounts involved, SIS stated that they have an obligation to their stakeholders to ensure that the loans being made are properly documented in a manner that is as transparent as possible.
The period leading up to Christmas saw an exchange of correspondence between the respective lawyers. While Senscot was aware that there would be an arrangement fee of around £500 it was at this stage that Senscot became aware that we would be liable for SIS’s legal fees (capped at £1,000). Senscot, in addition, would be responsible for its own legal fees to DLA.
SIS agreed to fund 80% of a quarterly claim with each advance repayable after nine months.
Towards the end of December the issue of “Assignation” reared its head. This was confirmed in early January. In essence, SIS had been advised to seek to assign rights to Senscot’s ESF agreement (in the event of Senscot going bust) but without the obligations of fulfilling the terms of our agreement. The Scottish Executive and the Objective 3 Partnership would not agree to this.
This issue was eventually resolved towards the middle of January, when SIS agreed to dispense with the need for the assignation of funds. The final facility letter arrived within a fortnight and the drawdown will be complete within five working days.
Approximately three months.
Copies of constitutions, agreements/contracts, three year cash projections.
Approval of ESF (and maybe Scottish Executive).
Expected within nine months or as soon as ESF monies come through.
80% of quarterly claim paid within five working days depending on paperwork being in order.
Costs:Legal fees (for SIS) capped at £1,000 arrangement fee – approximately £500, Senscot legal fees – approximately £1,000 – £1,500. Total…. £2,500 approximately.