Well it’s about time! Statistics released yesterday show that more money has been lent under the Bounce Back Loan Scheme (BBLS) in its first week that the Coronavirus Business Interruption Loan Scheme (CBILS) in more than a month.
In the week since it went live, 268,173 businesses have received approved loans totalling £8.4 billion, which works out at just a little north of £31K per loan.
In case you’ve not seen the details on BBLS, these are specifically targeted at SME businesses and have many very attractive features.
- Loans are capped at 25% of your 2019 turnover, up to a maximum of £50K
- No fees or interest in the first 12 months
- Repayment term of 6 years with no early redemption penalties
- Interest fixed from year 2 at just 2.5% per annum
- No personal guarantees
- Loans are 100% guaranteed by the UK government. If your business does fail, any assets in the company will be seized by the bank but they cannot take any of your personal assets. Your home, your pension, your car; they are all safe.
- Online application with only a few questions, no need to attach any financials, projections or business plans
I have applied for one for my business and am advising all of my clients to do the same. From application submitted to money in the bank, with a short stop in between to sign the facility documents, is taking anywhere from 2 to 5 days. Based on the numbers above, banks have been approving BBLS loans at the rate of 38,000 a day and they’ve worked through the bank holiday weekend! That is a phenomenal performance, and I applaud both the Chancellor and the banks for getting this scheme right the first time.
Many entrepreneurs I know are reluctant to take on debt. They are worried it’s going to be too expensive, or they’re going to have to give a personal guarantee, or they just don’t like the thought of being in debt. If you’re one of these people, I would urge you to reconsider. This is unquestionably the cheapest business debt I have ever seen. There are no personal guarantees. And if the thought of being in debt scares you, think instead about what you could use the money to invest in and build your business. Not sure what to spend the money on? Have a look at this excellent article written by my friend Daniel Priestley – How to spend £50K
Turning to the CBILS facility, so far 35,919 businesses have received CBILS loans totalling £6.1 billion.
That means more BBLS loans have been approved every day compared with the total number on CBILS loans, although the average CBILS loan is just shy of £170K.
There is no question: if you can survive with up to 25% of turnover capped at £50K as the loan you need to get through this crisis, then take it. As Pink Floyd sang: “grab that cash with both hands and make a stash!” If you need more than £50K then the CBILS facility is still a very good offer, but you’ll have to work harder and it takes longer. Most CBILS facilities I’m hearing about have taken around 4 weeks to secure. You need to provide historic accounts, a business plan with both normal and Covid-19 affected projections for the next 12-18 months, and the banks are scrutinising the documentation much like they would for a normal commercial loan. I’ve helped several businesses get their CBILS facility through. If you need help with this, please get in touch.
Word on the street is that the Chancellor is pressuring the banks to lighten the burden of the CBILS application. We’ll have to watch this space and see what comes from that…