Is your business struggling to repay bounce back loans or coronavirus business interruption loans?
We are going to look at options for your company if this is the case, and how we can help you as a business.
What is the Bounce Back Loan Scheme (BBLS)?
The BBLS was launched to help businesses survive the pandemic. Initially they were able to obtain a six year term loan, later extended to ten years. This was at a set government interest rate of 2.5% per annum.
The amount a business could borrow was £50,000- capped at 25% of total turnover.
Repayments were deferred for 12 months and the first 12 months of interest paid by the government.
Repayment towards a BBL takes the form of a series of equal monthly instalments directly to the lender.
What is the Coronavirus Business Interruption Loan Scheme (CBILS)
The CBILS was designed to provide financial support to smaller businesses across the UK.
This was specifically for the smaller businesses that were losing revenue and seeing their cashflow disrupted as a result of the Coronavirus outbreak.
When did the schemes start and end?
CBILS opened for applications in March 2020 and BBLS in May 2020. Both schemes closed for applications on 31 March 2021.
This means that businesses, who were granted the schemes early in the pandemic, will now already or very soon need to start making repayments.
My business can’t afford to repay
Am I personally liable if my business can’t repay?
Nobody could foresee that lockdown measures would still be in place a year on from when these loans were offered. Businesses presumed they would comfortably be able to repay the loans . Unfortunately for some, business is still not back to normal and has cause problems in repaying the loans.
The first thing to do is to explore the options for the pay as you grow scheme.
If you have done so and still think you are not in a position to pay back the loans then you will be understandably worried.
As banks were given security for lending through these schemes, you did not have to provide a personal guarantee. This means if you are unable to pay the loa, the government will step in and ensure the bank receives the money you were lent.
Unless you have misused the BBL funds, you will not be held personally liable for repaying the money owed.
However, liability remains with the borrowing businesses unless the company enters liquidation.
What should we do if we know that we can’t repay the loans?
All is not lost! There are ways to turn around a business in financial distress such as creditor negotiations, refinancing, or a complete restructure of its operations.
The government security on the loan will only take effect should your company enter a formal liquidation process so if you want your business to continue post pandemic then the loans and their repayments must be dealt with.
Therefore you must take action. I you are worried about your business’s finances you need to seek professional help and speak to an accountant.
Early intervention is vital to survival. Restructuring assistance is available and possible but timing and planning are key.
In order to quip yourself for the changes that may need to take place get in touch ASAP to get some professional advice into your financial situation. Click here if you need some advice today.