During this Pandemic (which we are all still very much living through) many businesses have been experiencing a great financial strain. To support all businesses and help keep our economy going, in 2020 the Government introduced loan schemes to help you through your business’ recovery phase. Although many of us have already welcomed the support from the Government with open arms, there are still a few who have not yet taken the support they need. Simply because, they are not sure which option is best for their business.
Below I will give you a breakdown of the differences between the Bounce Back Loan Scheme (BBLS) and the Coronavirus Business Interruption Loan Scheme (CBILS). So, for those who are stressed, experiencing financial difficulties within the business, and feel unsure about which scheme to choose…this article is for you.
Bounce Back Loan Scheme
A Bounce Back Loan is aimed at small and medium sized businesses who are now facing financial difficulty, due to Coronavirus. This loan is a 100% Government-backed loan, with a maximum available £50,000.
Highlights of a BBL
- Loans of £2,000 to £50,000 (max 25% of turnover) over 6 years.
- The Government provide a 100% guarantee.
- The Government settles any interest and fees for the first 12 months.
- No repayments are due for 12 months.
- There are no early repayment charges; and
- Interest is set for all loans at 2.5%.
Eligibility Criteria
You can apply for a loan if your business:
- is based in the UK
- was established before 1 March 2020
- has been adversely impacted by the Coronavirus
If your business was classed as a business in difficulty on 31 December 2019, you will need to confirm that you’re complying with additional state aid restrictions.
How to Apply
The BBLS Scheme was extended to 31st March 2021. This means that you now have until this date to apply.
There are 29 lenders participating in the scheme including many of the main retail banks. You should approach a suitable lender yourself via the lender’s website. As of September 2020, lenders are only providing loans to existing customers.
To view the list of current lenders, please visit the lenders website here:
Coronavirus Business Loan Interruption Scheme
A Coronavirus Business Interruption Loan, is a scheme that helps small and medium sized businesses to access loans of up to £5 million. 80% of this loan is guaranteed by the government.
Highlights of a CBIL
- Loans can be provided up to £5 million.
- The Government provide an 80% guarantee.
- Personal guarantee may also be required for loans over £250,000.
- The Government settles any interest and fees for the first 12 months.
Eligibility Criteria
You can apply for a loan if your business:
- is based in the UK
- has an annual turnover of up to £45 million
You will also need to show that your business:
- would be viable were it not for the pandemic
- has been adversely impacted by the coronavirus
If you want to borrow £30,000 or more, you also need to confirm that your business was not classed as a business in difficulty on 31 December 2019.
How to Apply
There are 117 lenders participating in the scheme including all the main retail banks. You should approach a suitable lender yourself via the lender’s website.
You will need to tell the lender:
- the amount you would like to borrow
- what the money is for
- how long you would like to pay it back
Supporting documents
You will need to provide documents that show you can afford to repay the loan.
These may include:
- management accounts
- cash flow forecast
- business plan
- historic accounts
- details of assets
The documents required will vary from lender to lender and depend on how much you are asking for.
So Which Decision Is Best For Your Business?
If your requirement is less than £50,000, the Bounce Back Loan seems a clear winner, easy and quick to apply for and with interest at 2.5%.
If it is more than £50,000 then getting the BBLS will prevent you from getting CBILS in the future as you cannot take out both loans together.
Deciding on taking out a loan is not a decision that should be taken lightly. It is very important you discuss this with an experienced Accountant before you go ahead. Here at Outsourced, our Accountants are on hand to discuss this further with you and to help you make the best decision for your business.
Get in touch! Consultations are always free of charge. 0208 249 6000
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Written by Tricia Carr