Supporting Cash Flow with loans (BBLS and CBILS)

There has been a flurry of activity over the weekend to ensure that the government backed loan schemes are revamped and ready to roll out this morning.

There are a number of schemes available to business owners and the choice can seem overwhelming so we have created a info-graphic to provide a quick over-view as a starter.

NB Please note interest rates are based on amounts quoted on websites and other material of lenders and are provided as a guide only.

As you can only have one BBLS or CBILS loan per business or group it’s important that you make the right decision about the amount of funding you need. It’s therefore vital that you put together a cash flow forecast to make an informed decision.

Bounce Back loans (BBLS)

The Government’s new Bounce Back Loan scheme (BBLS) has now gone live online and is open for applications.

This new scheme is aimed specifically at small to medium-sized businesses looking to borrow a smaller amount to assist them with cash flow and other issues.

Key Features 

  • Businesses can borrow up to 25 per cent of their turnover, from £2,000 up to a maximum loan amount of £50,000.
  • Unlike the Coronavirus Business Loan scheme (CBILS), the BBLS is 100 per cent backed by the Government – ensuring that loans can be provided with fewer checks to more businesses.
  • The BBLS is being administered by the British Business Bank and the loans will be provided by accredited lenders (find details of accredited lenders by clicking here).
  • There will be no interest or repayments due on BBLS finance for 12 months, and after this period the Government has agreed to a low fixed interest rate of 2.5 per cent.
  • The length of the loan is for six years but early repayment is allowed, without early repayment fees.
  • There will also be no guarantee or administration fees, or any requirements for personal guarantees.
  • Businesses that have already acquired finance of £50,000 or less from the CBILS can transfer into the BBLS.
  • Despite the backing of the Government, borrowers will remain 100 per cent liable for the debt from the finance.

Eligibility

The BBLS is open to businesses from most sectors and those applying must be able to self-certify the following to lenders:

  • It is UK-based in its business activity and established by 1 March 2020;
  • It has been adversely impacted by the Coronavirus (Covid-19);
  • It is not currently using a government-backed Coronavirus loan scheme (unless using BBLS to refinance a whole facility);
  • It was not a business in difficulty at 31 December 2019; and
  • It is not in bankruptcy, liquidation or undergoing debt restructuring.

Some organisations are excluded from BBLS finance, this includes:

  • Credit institutions (falling within the remit of the Bank Recovery and Resolution Directive)
  • Public sector bodies,
  • State-funded primary or secondary schools
  • Insurance companies.

Application Process 

Once a business has selected an accredited lender via the British Business Bank website here, they will be required to fill in a short online application form on their chosen lender’s website.

This self-certifies that they are eligible for a Bounce Back Loan facility. The bank will then undertake standard customer fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks.

If the bank is satisfied that the borrower meets the conditions of the BBLS then they should be able to release funds within a matter of days – in some cases within 24 hours.

To start the BBLS application process please click here

If one lender turns a business down, they can still approach other lenders within the scheme.

BBLS is designed to be fast for lenders to process and quick and easy for businesses to access, which is why businesses will only be required to fill out a short application form online for each new lender.

Coronavirus Business Interruption Loan Scheme (CBILS)

The CBILS scheme has been out in the public domain for a lot longer than it’s smaller brother the BBLS and we are aware of a number of clients who have made applications to the scheme already.

One tweak to the scheme is that the lower level of funding has now being set at £50,001 which actually makes a lot of sense given the BBLS is for amounts between £2,000 and £50,000. 

Our advice if you are making an application for a CBILS loan is to be prepared. Read our top tips article as background.

We know that the level of scrutiny for CBILS loans will be a lot higher than the BBLS and lenders have now issued a lot more guidance about what they expect to see in an application;

  • Last three years accounts,
  • 12 month bank statements,
  • Up to date management accounts,
  • Aged debtors and creditors,
  • Analysis of debt (other loans) including; the provider, term and repayment details,
  • Personal statement of assets and liabilities,
  • Home address of shareholders/ directors,
  • Statement around how Covid-19 has affected the business and what the funds will be used for, and
  • Twelve months cash flow forecast.

The banks and other lenders are using their traditional credit processes and whilst they have diverted a significant number of their teams into this process decisions are not quick. We estimate around 2 weeks however, we are aware of decisions taking longer.

Funding Circle 

For those  looking to borrow up to £250,000 a quicker option (but maybe more expensive) might be Funding Circle. With experience of dealing with applications quickly and systems and processes set up for small business funding Funding Circle have positioned themselves in the sub £250,000 loan category and advise that decisions will be back “typically within 24 hours”.

For more information about the Funding Circle CBILS loans please look at their website. If you would like to speak to us about making an application to Funding Circle please call either Richard Hallsworth or Stephanie Smith on 01522 81 5100.

Crowdfunding

A really interesting alternative to raising funds via a loan is to ask the community around you to help support your business through a crowdfunding campaign. Typically used by community groups to fund their projects there is now a scheme that allows businesses to tap into their customer base.

The basic principle here is that you can offer rewards to be delivered when restrictions are lifted and conditions allow but that are paid for now. This might be a voucher to be used to redeem against coffee and cake or a “buy one get one free” offer.

This could offer an exciting and creative way of stimulating interest in your business and its Covid-19 journey and generating cash at the same time. We are currently exploring the scheme and will post more on this later.

We’re here to help

If you would like to learn more about any of these schemes please pick up the phone (01522 81 5100) and call either Stephanie Smith or Richard Hallsworth.