Practical Guide to Accessing Covid-19 Loan Support
As the Covid-19 pandemic continues to weigh on the economy, the deadline for government-backed loan schemes is fast approaching. Read on to find out more about these schemes and what lenders will look for when assessing applications.
The Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS) will close to applications on 31 March, so time is of the essence if you are considering applying.
Since these schemes launched, lenders have approved almost 1.5 million BBLS facilities totalling over £44.7 billion, and 87,529 CBILS facilities totalling more than £20.8 billion. That gives an average BBLS facility size of £30,414 and an average CBILS facility of £238,092.
Data from the British Business Bank, which manages these schemes through accredited lenders and partners, shows that Scotland accounts for 6% of BBLS and CBILS facilities offered, in line with its share of the UK business population.
BBLS key features
• Loans from £2,000 to £50,000 (maximum 25% of business turnover)
• UK Government provides 100% guarantee to the lender – no personal guarantees or security over personal assets
• 2.5% interest rate – UK Government meets interest and lender-levied fees for first 12 months
• Six-year term, which can be extended to 10 years on request – early repayment allowed without additional fees
• Eligibility checks apply
• The borrower always remains fully liable for the debt
BBLS application process
The first step is to view the range of lenders accredited by the British Business Bank. You will then need to complete a short online application and confirm your business is eligible for a loan.
The lender will then carry out appropriate fraud, anti-money laundering and Know Your Customer checks before making a decision. If your application is unsuccessful, you can approach other BBLS lenders.
CBILS key features
• Available for loans, overdrafts, asset finance and invoice finance
• Borrow up to £5 million
• Six-year maximum term for loans and asset finance
• Three-year maximum term for overdrafts and invoice finance
• Government provides partial guarantee to the lender
• No personal guarantees for facilities up to £250,000
• UK Government meets interest and lender-levied fees for first 12 months
• Interest rates vary between lenders
• Eligibility and affordability checks apply
• The borrower always remains fully liable for the debt
CBILS application process
First, you need to check that your business is eligible. You will need to demonstrate that it:
• Is based in the UK
• Has an annual turnover below £45 million
• Generates 50% of its income from trading activity in the UK
• Has been adversely affected by Covid-19
• Would be viable were it not for the pandemic
If your business is eligible, you can then select a lender that has been accredited by the British Business Bank. Early engagement with your chosen lender will help you to prepare a viable application.
Lenders will want to know how your business has been affected by Covid-19 and how the CBILS funds will be used. You will also need to show how your business can recover from the impact of the pandemic and – importantly – demonstrate the ability to repay the CBILS facility.
Preparing your CBILS application
To support your application for a CBILS facility, you will need to provide the lender with up-to-date and relevant financial information. For larger facilities, for example those over £1 million, a lender may also want to see a business plan.
Business plans typically begin with an executive summary, which provides a brief overview of your business, its target market and financial highlights. You will also need to include sections covering the business background and objectives, information on its products and services, how the funds will be used to benefit the business, competitor analysis, details of management and employees, actions taken to mitigate the risks of Covid-19 and your strategy for recovering from the pandemic.
Financial and supporting information
Lenders will want to see the last two years’ financial statements for your business, along with management information – profit and loss, and balance sheet – for the current year. In addition, you will need to provide financial forecasts with detailed assumptions, information about creditors and debtors, details of existing debt and the most recent six months’ bank statements. Please note that lenders may ask for bank statements going back longer to check how your business was trading before the pandemic.
At every stage of the financing journey, it is crucial to maintain an open and honest communication with lenders. If you ever think you will have difficulty in meeting your loan repayments, take action immediately and speak to your lender – do not bury your head in the sand.
A range of options may be available from your lender to help overcome any problems, such as interest-only periods, repayment holidays or restructuring the facility, for example by extending the term of a loan to reduce the monthly repayment holidays. It is also possible to refinance existing debts with a BBLS or CBILS facility.
LendingCrowd, the trading name of Edinburgh Alternative Finance Limited, was founded to help SMEs thrive by giving them access to non-bank lending. Headquartered in Scotland, it is proud to have been accredited by the British Business Bank to provide CBILS loans during these unprecedented times.
To find out more about LendingCrowd, call 0345 564 1600 or visit www.lendingcrowd.com