The Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS) are government initiatives to help small businesses in the UK affected by the coronavirus outbreak to access finance.

Whilst the news of the vaccine is positive, the impact of Coronavirus on our daily and businesses is still very real and there are still challenging months (if not, years) ahead. It is important you review whether applying for finance is the right step for you and your business to aid its survival.

This scheme has had several extensions. You now have until the 31 March 2021 to apply.

But it’s worth starting an application early to keep your options open, beat the rush and get a faster decision.

But you need to have done your homework.

We’ve outlined below the criteria for these loans, your funding options and what you need to take into consideration when making this decision.

Coronavirus Business
Interruption Loan Scheme

Are you eligible for a CBILS loan?

  • Has your business been adversely affected by Coronavirus?
  • Have you been trading for more than 1 year?
  • Were you profitable before the current crisis? (only exception is first year loss but up to date management accounts show profit)
  • Is 50% of your turnover from your main trade (investments will not be assessed)
  • Are you accounting records up to date with bank accounts reconciled to 31st March?
  • Are you able to demonstrate you have taken up all other possible reliefs? VAT deferrals, time to pay, job retention scheme etc.
  • Are you able to demonstrate you have negotiated with suppliers, deferred rent and implemented other cost cutting measures?
  • Have you completed a comparison of pre and pot COVID 19 trading conditions?
  • Was your business ‘viable’ at December ‘19?

What are the aspects to any CBILS loan?

  • Term loans and asset finance up to 10 years
  • Invoice finance and overdrafts up to 3 years
  • Capital repayment holidays of up to 12 months
  • First year’s interest and arrangement fees covered by the government
  • No charge for the 80% government guarantee
  • There are no personal guarantees for loans of less than £250k and if over this amount the personal guarantee is only for 20% of the loan

How much can your business borrow?

The maximum loan is 2 times the annual wage bill or 25% of turnover if the business has been open for 2 years or more. It is not clear whether it’s the higher or the lower of the two and this may be down to your bank’s discretion.

If your business has not been trading for two years, then the maximum amount is 1 times the annual wage bill.

What interest rate will you pay?

Typical rates will be between 1.8% to 7.4%.

What information do you need to complete before you approach a lender?

  • Up-to-date annual accounts submitted to Companies House
  • Management Accounts up to 31stMarch 2020
  • 6, 9 and 12-month cashflow demonstrating repaying delayed VAT, PAYE etc

Can you only apply for a CBILS loan through your bank?

When CBILS loans were first rolled out, they were typically offered by banks only, which led to many small business owners believing this was the only place they could get them.

As the scheme has grown, there are many more options available.

Funding Circle is one of these alternatives, as is Fluidly. As details on the offering can vary from provider to provider, it’s definitely worth shopping around to find the deal that best suits you.

Bounce Back Loan Scheme

Who can apply?

  • Small companies, sole traders and partnerships
  • Have been adversely affected by Coronavirus
  • Established before 1st March 2020
  • You intend to use the loan for UK-based business activity
  • Not in bankruptcy, liquidation or undergoing debt restructuring

What are the key details you need to know?

  • You can borrow between £2,000 up to 25% of turnover. The maximum loan available is £50,000
  • The government will cover the interest repayments for the first 12 months
  • Repayment free for 12 months
  • Post 12-month interest rate is 2.5%
  • Not open to organisations that are primarily funded by government and a few others (e.g., education, insurers, banks etc.), but insurance brokers can apply
  • If you originally borrowed less than the maximum amount available to you, you may be eligible to top-up your original loan (as long as the whole amount doesn’t exceed 25% of your turnover or £50,000)
  • You cannot apply if you’ve already been paid out for a Coronavirus Business Interruption Loan Scheme (CBILS) loan, but you can ask you CBILS lender to reclass part of your CBILS loan as bounce back up

What information do you need to supply?

  • Evidence or overview of how you were negatively affected
  • Financial accounts up to 31st December 2019 or Management information from start of new year to 31st December 2019 showing you were solvent and viable at 31st December 2019

NB – If you can prove turnover was increased in March 2020 quarter or after you may want to supply management information or bank statements to help maximise the lending value

It is not expected that you will need to supply any kind of cashflow forecast.

If your balance sheet is insolvent what can you do?

If this is because of money owed to you as director, you can recapitalise as shares to bring you to a positive position BUT you won’t be able to draw this back until you exit the business. Alternatively, you may prefer to look at other finance.

What will it cost your overall?

  • You can borrow a maximum of £50,000 over a 6-year period with no interest or repayments for first 12 months
  • At 2.5% interest your repayments would be £1,095 per month with overall interest of £2,560

Taking finance is a big commitment in any circumstances 

We’ve tried to go into as much detail as we can above, but it’s important you plan carefully and ensure this is the right decision for your business and you ask for the right amount, as it may affect your ability to borrow during the term of lending.
Of course, knowing the right amount in current times is like chasing the end of a rainbow, so talk to one of our team and we can help assess your personal circumstances and help you come to the best decision for your business.

Contact me today!

Emma White



01474 853856

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