Coronavirus Support Loans
In response to the economic uncertainties triggered by the COVID-19 pandemic, the British Business Bank PLC, a development bank wholly owned by the British government, introduced the Bounce Back Loan Scheme (BBLS) and the Coronavirus Business Interruption Loan Scheme (CBILS).
These aimed to help businesses during the pandemic. Applications for these loan schemes closed in 2021. However, with a standard loan term of six years for the BBL and CBIL, many businesses are still repaying them.
What is a Bounce Back Loan (BBL)?
The Bounce Back Loan Scheme, administered by the British Business Bank, emerged as a lifeline tailored for small and medium-sized businesses. Eligible companies could secure loans equivalent to 25% of their annual turnover up to £50,000, with a fixed interest rate of 2.5%.
The BBLS was 100% guaranteed by the government, meaning that no personal guarantees were required on Bounce Back Loans.
The repayment term spans up to six years, with an initial 12-month repayment holiday and interest payments made for the first year by the government. Repayments can be made at any time with no early repayment fee.
Despite the BBLS’s essential financial support, businesses may need help to meet repayment obligations. After the initial 12 months, the monthly repayments could become a hurdle for small and medium-sized businesses undergoing prolonged financial difficulties. Under the Pay As You Grow scheme, it is possible to extend the loan term to 10 years.
What is a Coronavirus Business Interruption Loan (CBIL)?
The Coronavirus Business Interruption Loan Scheme, another initiative the British Business Bank facilitated, targeted larger enterprises facing challenges due to the pandemic.
Like the BBLS, the CBILS offered businesses a 12-month capital repayment holiday. For the first year of the loan, interest payments were also made by the UK government.
Similar to BBLS, businesses that took part in the Coronavirus Business Interruption Loan Scheme may encounter challenges in meeting repayment obligations if faced with financial difficulties.
The interest rate on a CBILS loan may be variable or fixed, adding another layer of complexity for businesses navigating financial challenges. The six-year loan term may burden businesses facing sustained economic challenges. It is possible to secure a CBILS loan extension to 10 years. However, this comes down to the discretion of the lender.
Unlike BBLS loans, the government 80% guaranteed CBILS loans, meaning lenders may have requested security over business assets or a personal guarantee for CBILS loans over £250,000. A personal guarantee means your assets may be at risk if your business cannot repay.