COVID-19 Business Loans: What You Need to Consider
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Without any doubt, COVID-19 has shaken our world vigorously. Nobody expected the pandemic we are currently experiencing. While everyone around the world faces life in quarantine, some have already lost their jobs, homes, and are going hungry.
In one of its efforts to keep the economy going, the UK government offers loans with several lenders as partners to support businesses in the country.
COVID-19 Business Support by the UK Government
If you have already secured one of these financing programs, you will be unqualified to apply for another to give a chance to other struggling businesses in the country. Furthermore, installment loan requirements for these programs may include a business plan, details of assets, cash flow forecast, management accounts, and historical accounts.
Below are some of the government’s efforts in giving support to various businesses:
The Coronavirus Large Business Interruption Loan Scheme (CLBILS) provides financial help to larger businesses with an annual income of more than £45 million and is affected by COVID-19.
Under this scheme, you can apply for loans, asset finance, invoice finance, and revolving credit facilities up to £200million. On top of that, the government guarantees 80% of the amount to the lenders. This type of financing ranges from 3 months to 3 years and is only available to 12 lenders, including leading retail banks.
Banks, building societies, insurers, public-sector bodies, reinsurers (not insurance brokers), and state-funded primary and secondary schools are not qualified to apply for CLBILS. As of August, the Treasury recorded 480 larger businesses who benefited from this scheme. More and more large business owners are expected to take advantage of the program as the country continues to endure this pandemic.
The Coronavirus Business Interruption Loan Scheme (CBILS) is a program by the UK government to help small and medium-sized businesses affected by COVID-19. There are already 58,600 small and medium-sized enterprises (SMEs) who have already taken advantage of it. The term of this type of loan ranges from 3 to 6 years, depending on the type of financing, and can support business owners up to £5 million.
Aside from the fact that the government guarantees 80% of the finance, they will also shoulder the interest rates and initial fees for the first 12 months. Several lenders can help you with CBILS. It is best to do some research to find a suitable lender that can help you with your current business needs.
If your business is based in the UK, has an annual income of about £45million or less, and is greatly affected by the coronavirus, you are eligible for CBILS. However, you need to prove that your business was feasible before the pandemic has started. For those who want to acquire £30,000 or more, you should make sure that your business didn’t belong to those classified as “business in difficulty” back to December 31, 2019.
Like the CLBILS, the government emphasized that banks, insurers, public-sector bodies, reinsurers (not insurance brokers), and state-funded primary and secondary schools are not eligible for the loan.
Bounce-back Loan Scheme
The Bounce-back Loan Scheme (BBLS) is one of the quickest ways to get financial support during the coronavirus outbreak, offering up to £50,000 for smaller businesses. More than 1.13 million businesses have already benefited from this scheme. The government guarantees 100% of the finance with 0 interest rates or initial fees and no due repayments for the first 12 months. After 12 months, there will be an interest rate of 2.5% per year.
If your business started before March 1, 2020, and has been greatly impacted by the coronavirus, you are qualified under this scheme. The term of this loan is six years, and there are only 11 lenders that can help you process this type of loan, including leading retail banks in the country. Lenders may require you to submit an online application form to see if you are qualified.
What to Expect
If you own a business that is struggling due to the pandemic and qualify in one of the schemes above, you can apply online. The government’s business support website will accommodate your search in finding the right lender for you. While you search for lenders that can meet your needs, it is also better to prepare all the needed requirements and keep it on hand.
It will help if you keep in mind that it’s the lender who will decide whether to accept your application or deny it. Lenders will need time to evaluate your application for security purposes. If one lender denies your application, then there are other choices available.
It is expected that lenders will be busy due to the number of applicants. Some lenders require those who want to borrow a massive amount of money to apply in person. And since social distancing is a must, it will be hard to accommodate a lot of people in a very short time.
Undeniably, business management operations during these tough times are challenging. Several businesses closed their doors and went bankrupt. This also means that a lot of people lost their jobs during the pandemic. Consider taking advantage of the government’s financing programs to make ends meet and save your business from collapse.