Time to apply for Government-backed business finance schemes.

19th Oct 20

The government support packages designed to help businesses through the coronavirus crisis and lockdown are coming to an end shortly. This means that time is starting to run out to apply for government-backed business finance, such as the Coronavirus Business Interruption Loans Scheme (CBILS) and the Bounce Back Loan (BBL) scheme.

With this in mind, we look at what you need to know about the ending of the Scheme, and how you can best prepare.

What is the Coronavirus Business Interruption Loan Scheme (CBILS)?

The Coronavirus Business Interruption Loan Scheme (CBILS) is provided through the British Business Bank and a group of accredited providers. It is primarily focused on providing financial support to SMEs who have experienced lost revenue and cash flow disruptions as a result of the coronavirus.

Businesses can apply for a loan of up to 25% of their annual turnover.

To be eligible for the loan, your business will need to meet the following criteria:

  • A UK-based business that has been adversely affected by the coronavirus
  • Turnover of over £200,000
  • Minimum 3 years of trading history
  • Over 50% of turnover from trading activity (e.g. not from investments)
  • The loan is for business purposes.
  • The loan is primarily for trading in the UK.

When will CBILS end?

The Government has scheduled CBILS to end on the November 30, 2020.

Those who want to apply will need to have started their application by the end of the day.

Will the CBILS scheme be extended?

There are currently no plans to extend CBILS past this date at the moment, but please check gov.uk for the most up-to-date information.

How should I prepare for the end of CBILS?

The CBIL scheme was designed to help businesses through the pandemic, which means it has better features than most normal loans. For instance, the Government pays the interest for the first 12 months of the loan, in addition to paying any upfront fees, which means if you can pay the loan back in full within a year, it won’t have cost you a penny.

You will need to provide certain documents when you apply for a CBILS-backed facility. These requirements vary from lender to lender, but are likely to include:

  • Management accounts
  • Business plan
  • Historic accounts
  • Details of assets

The Bounce Back Loan Scheme

The Bounce Back Loan Scheme is a government initiative to help the UK’s smaller businesses deal with the impact of coronavirus. Under the Scheme, you can apply for a loan of £2,000 to £50,000.

Am I eligible for a Bounce Back Loan (BBLS)

 BBLS has the following criteria:

  • Have been adversely affected by the coronavirus
  • Intend to use the loan for UK-based business activity
  • Established before 1st March 2020
  • Not in bankruptcy, liquidation or undergoing debt restructuring

How much can I apply for?

Businesses can apply for between £2,000 up to 25% of their turnover.

The maximum loan available under the Scheme is £50,000.

What fees and interest will I be required to pay?

The Government has set the interest rate for this facility at 2.5% per annum. Lenders are not permitted to charge any fees.

The Government will cover the interest repayments for the first 12 months.

The government-backed guarantee on the loan is a guarantee to lenders. Businesses remain 100% liable to repay the full loan amount, as well as interest, after the first year.

What is ‘Pay-as-you-Grow’?

‘Pay-as-you-Grow’ is an initiative that has been introduced to give businesses more time and greater flexibility to repay Bounce Back Loan. This means repayments can now be extended from six to ten years, which is expected to cut the average monthly repayment in half. Businesses that are struggling can make interest-only payments, while any business in real trouble can apply to defer payments for up to six months. No business taking up ‘Pay-as-you-Grow’ will see their credit rating affected as a result.

Full details can be found at http://www.british-business-bank.co.uk

Check the coronavirus financial support options.

Check the newest business support packages announced for areas in lockdown