Over the last few months, thousands of companies in the UK and across the globe found themselves in rather unfamiliar waters. As your business navigates through this pandemic – trying to stay afloat, help from the Government is available, and even though the end is on the horizon, you may want to consider taking up on the offer to ensure a smooth transition and future financial stability.

Both of the Government backed loans offer good terms, but vary in value and ease of accessibility. Let’s take a closer look at the difference between the Bounce Back Loan (BBL) and Coronavirus Business Interruption Loan Scheme (CBILS).

Bounce Back Loan (BBL) who is it for?

This scheme was set-up for small, micro-businesses and the self-employed to make access to financial support easier. Providing you have a business bank account already set-up and meet the eligibility criteria, access to this fixed-term loan is very easy and the application process simple and quick. This is a self-certified loan open to all sectors with the exception of public sector organisations, insurance firms, banks, lenders, state-funded primary and secondary schools. Businesses self-declare that they are eligible for the loan by completing a short online application form. We would recommend applying online through your bank, find out which lenders are accredited: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/current-accredited-lenders-and-partners/

How much can I apply for with BBL?

Minimum amount you can receive is £2,000 on a Government fixed 2.5% interest rate. You may apply for 25% of your turnover with the loan maximum amount fixed at £50,000. Applications are open until 4th November 2020.

Repayments

No fees or interest to pay for the first 12 months. The length of Bounce Back Loan is 6 years, but you can re-pay it early without incurring any fees.

Who is eligible?

Eligibility criteria include:

  • Your business is based in the UK and was established before 1st March 2020.
  • The business is not in a bankruptcy or process of liquidation, debt restructuring.
  • The company did not have financial difficulties in December 2019. If you did, further assurances will be required.
  • The business is experiencing financial difficulties presently due to the pandemic.
  • At least 50% of the company’s income comes from trading, unless you are a charity or college.
  • You cannot apply if you are already claiming under CBILS, CLBILS or COVID-19 Corporate Financing Facility, unless you are planning to use Bounce Back Loan to refinance. 

Coronavirus Business Interruption Loan Scheme, who is it for?

The scheme was set up for small and medium sized businesses which need to access financial support due to COVID-19. Unlike BBL, CBILS requires the applicant to submit much more in-depth financial information to the lender which makes the process slightly more lengthy and complex, but can also offer higher value. There is also a greater flexibility as you can apply for a fixed term loan, asset finance, overdraft or invoice finance facility. You should try to apply with your bank first, but should you be turned down, there are more than 50 lenders participating in this scheme, you can find them here: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils-2/for-businesses-and-advisors/

How much can I apply for with CBILS?

The maximum you can apply for is £5m although some lenders have been known to cap this to 25% of the company’s turnover or 2 years of wage bill.

Repayments

The Government guarantees 80% of the payments, however, you are responsible for repayment of 100% of loan facility, not just the remaining 20%. The Government will pay your interest and fees for the first 12 months. Unlike with the BBL, the interest rate and fees are set by your lender so these will vary. You will have up to 6 years to re-pay your fixed term loan or asset facilities and up to 3 years for overdrafts and invoice finance.

Who is eligible?

Eligibility criteria include:

  • UK based businesses with a turnover of no more than £45m
  • You self-certify that your business has been impacted by the pandemic
  • Your business was not in a financial difficulty in December 2019
  • You are not going through a process of bankruptcy, liquidation or debt restructuring.

Application process.

You have until September 2020 to make an application. You have to be able to prove to the bank that had it not been for the COVID-19, the lender would have considered you as a viable business. You will also have to tell the bank what is the loan for –

You will be asked to be produce relevant financial information, these could include: cash flow forecasts, historic accounts, management accounts, business plan, details of company’s assets. Our recommendation is that you pay extra care in submitting accurate information to avoid being rejected, because as far as loans are concerned – the more insight and reassurance you can provide – the better.

We are here to help. Here at Ivybridge Accountants we have been supporting our customers right from the beginning of this pandemic. If you need our advice or would like us to signpost you in the right direction, please don’t hesitate to reach out.  For more information about Government supported loans, please go to: https://www.gov.uk/guidance/apply-for-a-coronavirus-bounce-back-loan