ALMOST £9 million could be lent by Wiltshire Council to Wiltshire College and University Centre - subject to negotiation, due diligence and scrutiny.

The council's cabinet on Tuesday gave permission for negotiations to continue on making the loan. The college has offered its Lackham College campus as security.

If the outcome is successful and the loans are approved by the council, the college would use some of the cash to pay off existing bank loans which have higher interest rates.

The council’s cabinet voted to give permission for the negotiations to go ahead.

Officers will now work on an offering the college two further loans totalling £6.312 million, on top of a £2.435 million loan agreed in July 2019.

The loans have been agreed in principle but still need the approval of full council on February 25.

A council spokesman said: "There are many steps to come, and if a loan is agreed there are many options as to what security the college will offer and whether that will be acceptable to the council.

"The council will take independent advice on the security and interest rates that should be offered based on that security."

Wiltshire College principal Amanda Burnside said: “The council has approved a loan of £2.5m to complement Swindon and Wiltshire Local Enterprise Partnership funding, awarded to the college in 2017, to support campus redevelopments on our Salisbury and Lackham campuses.

“Also, the council has agreed in principle to offer a further loan of £6.3m to the college and the two organisations are in early discussions around this.

“As is normal business practice, and with more preferable rates than commercial banks, the college is exploring the option of transferring existing loans of £6.3m to the council.”

The council has the option to put a charge on the Lackham College land, should the college default on repayment.

That could mean the council ends up owning land it could use for its own Chippenham Futures plan, which aims to improve the A350 and build more homes.

Cllr Simon Jacobs, the council’s cabinet member for finance and procurement, told colleagues: “The loan will be subject to due diligence and obtaining required security for the loan and proof of cash flow.”

A council spokesman said on Wednesday: “If full council supports the loan then it will be necessary to undertake work to establish the loan rate.

“It is recommended that the detail of the arrangement is delegated to the cabinet member for finance, in consultation with the director of finance.

“Legal advice will be sought to ensure the rate is set at a level that complies with state aid legislation. The rate will not be at commercial levels but will be set at a level to ensure it is favourable to the college.”

The college approached Wiltshire Council in July last year for a £2.5m loan, but when the assets it offered as security were valued they only came to £2.435 million, based on an alternative use valuation. A loan for that amount was then offered.

Cllr Jacobs told the council's cabinet the interest rate for the loans is still to be determined.

He said the rate would have to be competitive with the existing rates being offered by the commercial institutions to the college, and thus may be lower.

Cllr Ian Thorn, the Liberal Democrat leader on Wiltshire Council, said: “I am curious to understand why we would levy a lower interest rate on a second loan. Generally, additional loans attract a higher interest rate.”

Cllr Jacobs responded: “The cash return to the council would be higher. In addition, if the college offered its Lackham site as security, this may offer the opportunity to bring forward negotiations on land for the Chippenham Futures programme.”