Bounce Back Loan and CBILS: One year on

It’s a year since the introduction of the Bounce Back Loan scheme (BBL) to help smaller businesses impacted by Covid-19.

BBLs were designed to allow businesses to borrow between £2,000 up to 25% of turnover (capped at £50,000), with the government covering the interest (set at 2.5%) and no repayments for the first 12 months.

The loan scheme was launched on 4 May 2020 with the promise to provide SMEs with relatively small amounts of funding quickly, to help ease the immediate cashflow problems, which many businesses faced soon after the UK went into the first lockdown.  Over 1.5 million businesses took out a BBL before the scheme closed on 31 March 2021.

For many businesses, that means they will very soon need to start making Bounce Back Loan repayments and any interest.  However, there may well be issues for businesses who are not yet able to re-open fully or are still operating under restrictions and therefore, are not able to meet the repayments.

 

What about CBILS repayments?

There’s a similar scenario for any business that took out a Coronavirus Business Interruption Loan (CBIL), which launched on 23 March 2020.  The government-backed loan also offered 12 months interest-free and no repayments required for the first year.

 

I need to start the Bounce Back Loan repayments, what are my options?

Some businesses opted to take out the BBL on a ‘just in case’ basis, not knowing how severely the pandemic was going to affect them, or how long (at that stage) the furlough scheme was going to last – for these businesses they can now chose to pay back the loan in full, as there are no early redemption penalties, or begin the Bounce Back Loan repayments, if they have now used some or all of the funds.

You can request a repayment holiday – extending your BBL for a further six months, but the interest (at the original, fixed rate of 2.5%) will still kick-in after the first 12 months of the loan, meaning that will have to be paid back, in addition to the full loan amount.  This will also have to be agreed in advance with your bank or lender.

Another – but less preferable – option is to re-finance the loan.  At the beginning of April, the government launched the Recovery Loan Scheme (RLS), as a replacement for BBL and CBILS. Although the terms of the RLS are not as generous as for BBL or CBILS (for example, there will be interest and repayments due from day one), it may be worth considering, if you need to secure further funding. Again, this is a conversation with your bank or lender.

 

Any other advice for CBILS or Bounce Back Loan repayments?

Monitor your past performance through the review of your financial accounts. Are there any trends or areas of concern, that need to be investigated or further understood? Make sure that you understand what your numbers are telling you in terms of financial performance to date.

Forecast, forecast, forecast! Cashflow forecasting can be as complex or as simple as you need it to be; weekly, monthly or quarterly. One page or several pages, so long as it tells you what you need to know; what do we expect our cash position to look like in the foreseeable future?

Monitoring your cashflow closely and understanding your cash cycle will help you to work out exactly what you need to do, in order to start the Bounce Back Loan repayments, or if you need further funding or assistance.

 

Next steps

If you have questions about Bounce Back Loan repayments, funding and finance for your business, or are considering a Recovery Loan Scheme application, please do get in touch and our team of experts will be happy to help you.  We also offer Understanding Accounts training for directors, managers or finance teams – helping you better to understand your numbers.

You can download the latest episode of our 2 + 2 podcast, which offers advice and tips on funding and cashflow including details of the Recovery Loan Scheme.

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