BBLS, the Bounce Back Loan Scheme, and CBILS, the Coronavirus Business Interruption Loan Scheme, are two of the government’s initiatives to help small and medium companies keep operating during the pandemic crisis.
Their first goal was twofold: to survive and heal, then to develop. The Chancellor has modified the scope of the schemes and introduced additional precautions as the Coronavirus enters its second wave.
It is critical to understand the differences between the schemes and the modifications that have occurred if your company took out one of the loans in its original form or if you are thinking about applying for financing right now.
Our experienced accountants and business advisors at CBM Accounting can provide extensive advice on the best type of finance for your present situation and future objectives, but we hope this quick guide will assist you in making the correct first selections.
The First Bounce Back Loan scheme:
- BBLS is intended towards smaller firms, particularly those in the early stages of development, and offers loans of up to £50,000 based on 25% of yearly sales.
- The government guarantees the loans 100 percent, and the interest rate is set at 2.5 percent for the life of the loan, with the government covering the first year’s interest.
- The maximum loan duration used to be six years, but that has since altered (see below).
- There are no payments due for the first 12 months, and there are no arrangement costs or early repayment penalties.
- You can apply for a loan online with a lender who accepts self-certification and does not need guarantees. You are only allowed to apply for one BBLS loan at a time.
- Commentators think that, while BBLS offered a vital financial infusion to compensate for lost revenue, the amount available was modest and may not give room for expansion beyond the planned “survival period.”
- It also had limited flexibility because it was a term loan.
Under the Pay as You Grow scheme, which is part of the Government’s Winter Economy Plan, the Chancellor announced several adjustments to the original BBLS scheme in September.
The deadline for submitting an application has been extended to November 30, 2020.
From six to 10 years, the maximum loan duration has been increased. However, you may only pick between six and 10 years; no additional period is available.
There are interest-only periods available. If you are having trouble making payments, you can request up to three six-month interest-only payment periods. However, if you choose this route, you will wind up paying more interest in the end.
There are payment holidays available. If you are having trouble making payments, you can request a one-time payment vacation, during which you will not have to make any payments, including interest, for up to six months. You must, however, make six payments to be eligible, and you will pay extra interest altogether.
Aside from these modifications, the rest of BBLS remains unchanged.
The Coronavirus Business Interruption Loan Scheme was the first of its kind:
Small and medium enterprises with up to 250 workers and a turnover of less than $45 million are eligible for the CBILS scheme. Term loans, invoice financing, and credit facilities are all options for borrowing up to £5 million.
Term loans generally range from £750k to £5 million in financing. The term of the contract could be 3-5 years, with an interest rate of 8-12 percent per year.
The funding size for invoice finance is generally £100k-5m. The term of the contract maybe two years, with an interest rate of 8-14 percent each year.
The funding size for credit facilities is generally £100k-5m. The term of the contract may be between two and three years, with an interest rate of 8 to 14 percent each year.
The money may be utilized for several things, including mergers and acquisitions, repaying existing debt, and investing in future development. As a result, it is a more adaptable source of capital, focusing on both recovery and expansion.
The government guarantees 80% of the loans, and the lender based on the kind of financing sets the interest rate. A personal guarantee is not required.
The initial scheme period was six years; however, this has recently been extended (see below).
There are no payments due for the first 12 months, and there are no arrangement costs or early repayment penalties.
Businesses are not charged for the 80 percent guarantee, and the first twelve months of interest and the government covers fees.
Because the application procedure is more complicated and will be personalized to the alternatives you select, it is a good idea to hire an expert to assist you. If you have an outstanding BBLS loan, you cannot apply for CBILS funding.
Modifications to the CBILS:
As part of the Government’s Winter Economy Plan, the Chancellor announced two revisions to the original CBILS plan in September.
The deadline for submitting an application has been extended to November 30, 2020. From six to 10 years, the maximum loan duration has been increased.
Aside from these modifications, the rest of CBILS remains unchanged.
Extending your funds:
If you discover that you require more funds, you have many alternatives. If you have already taken out a BBLS loan, you will not be able to apply for another one, but you may be eligible for CBILS financing.
You cannot, however, have both forms of funding. Therefore, before applying for CBILS funding, you would have to return your BBLS loan – with no early repayment costs.
If you have used less than the maximum amount of CBILS money, you may be eligible for further cash under the scheme. This will most likely entail a conversation with your lender, as well as a new application procedure and credit checks.
The government has stated that a new funding plan will be implemented in the New Year, but no specifics have been released. Analysts think it will be a version of the Enterprise Guarantee Scheme (EFG) that would take the place of CBILS.
CBM Accounting can help:
These complicated problems demand careful study before making any final judgments. Our small business experts can assist you in determining the best form of finance for your company, as well as with cash flow, financial forecasts, and a variety of accountancy and providing examples.
Contact CBM Accounting to learn more about our services and eligibility restrictions.