This blog has covered the Self-Employed Income Support Scheme and the Job Retention Scheme in great detail (you can find the articles for those schemes here and here), but we haven’t covered the Coronavirus Business Interruption Loan Scheme or the Bounce Back Loan Scheme. Both schemes could be incredibly useful to your business in this time of difficulty. If you are unsure about which one to choose don’t worry, you’ve come to the right place. This article will outline both schemes and will show you which one would be more useful for your business.
The Coronavirus Business Interruption Loan Scheme (CBILS)
As part of the Government’s business support, the CBILS is intended to provide financial support to SME’s who have been affected by the pandemic. Essentially, the scheme lets you lend up to £5 million from a lender for up to 6 years and the Government will act as your guarantor – only for 80% of what you borrow. The Government will also pay for any interest or fees incurred on loan for the first 12 months.
You are entitled to apply for the scheme if you are a UK-based business and your turnover does not exceed £45 million. You must also be able to prove that you were not ‘a business in difficulty’ before the pandemic and also that your business would be viable were it not for the pandemic. It is worth bearing in mind that you cannot apply if you are a bank/insurer or in the public sector (this includes schools).
To apply you just have to go to any approved lender (in most cases this will be a main retail bank) and apply through them. They may require you to show evidence of cash flow forecast and historic accounts etc. since this they must decide whether the loan is suitable for you and that you will be able to pay it back.
Please bear in mind, despite the Government acting as a guarantor for a the majority of the loan,. It is still your responsibility to pay back 100% of what you borrow.
If you applied for the scheme previously and were unsuccessful, it is definitely worth checking again. This is because access to the scheme has been opened up to those smaller businesses that would have previously met the requirements for a commercial facility but would not have been eligible for CBILS.
Insufficient security is no longer a condition to access the scheme.
This significantly increases the number of businesses eligible for the scheme.
The Bounce Back Loan Scheme (BBLS)
The Bounce Back Loan Scheme has been introduced to help businesses where the Business Interruption Loan Scheme would not grant them finances fast enough. This scheme helps small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover. The maximum loan available is 10x smaller that the CBILS, standing at £50,000.
However, unlike the CBILS, the government guarantees 100% of the Bounce Back Loan and there won’t be any fees or interest to pay for the first 12 months. After 12 months the interest rate will be 2.5% a year.
Just like the other scheme, you are eligible to apply for the scheme if you are a UK-based business and have been adversely affected by the pandemic. The same exempted sectors apply. However, you are able to apply for this scheme even if you were declared a business in difficulty before December 2019, but you will need to provide evidence that you complying to state aid restrictions.
The length of the loan is 6 years, but you can repay early without paying a fee. No repayments will be due during the first 12 months.
Before your first repayment is due, your lender will contact you about further options to:
- extend the term of your loan to 10 years
- move to interest-only repayments for a period of 6 months (you can use this option up to 3 times)
- pause your repayments for a period.
Please bear in mind that you cannot apply to this loan if you are already receiving aid from the CBILS, but you can transfer up to £50,000 of that loan into the Bounce Back Loan Scheme.
Just like with the Coronavirus Business Interruption Loan Scheme, you will have to approach a lender yourself; again, in most cases this will be a main retail bank.
Get Applications In Quick!
As you can see, both these loans could be extremely useful for you and your business. After choosing which one best suits you, make sure to apply quickly as applications will not accepted after 31st March 2021.
Need help deciding which one is best for you? Why not contact us so we can help?
At J&P, helping small businesses is our passion, and we understand that companies across the UK are at risk now more than ever. We are here to support you through the Coronavirus crisis, so please do not hesitate to give us a call on 0161 637 1080 or send an e-mail to firstname.lastname@example.org.