As you will now know, the Government announced further help measures for businesses last week with the introduction of the 100% Government guaranteed Bounce Back Loan Scheme.
We now understand that you can if you so wish transfer a CBILS application to a BBLS application, and provide below a comparison of the key differences of the two loan schemes available to business owners.
| CBILS | Bounce Back Loan Scheme | |
|---|---|---|
| Guarantee | Provides the lender with a government-backed, partial guarantee (80%) against the outstanding guarantee facility balance (only principal). The portfolio cap has now been removed. | Provides the lender with a government-backed, full guarantee (100%) against the outstanding guarantee facility balance (both principal and interest), with no portfolio cap. |
| Guarantee fee for businesses | No fee. | No fee. |
| Fee charged to lenders for each facility | A fee is charged to lenders for each facility which makes use of the Scheme. | No fee to lenders. |
| Types of facility | Facilities available include term loans, overdrafts, invoice finance and asset finance facilities. | Term loan only. |
| Maximum and minimum value of facility | Following the launch of the Bounce Back Loan Scheme the minimum for term loans and overdrafts will be £50,001. Lenders delivering asset or invoice finance facilities only will still be able to provide finance at less than £50,001. The maximum value of a facility provided under the Scheme is £5m. | The minimum value of a facility provided under the Scheme is £2,000; the maximum is 25% of turnover up to a cap of £50,000. |
| Interest rate and fees set by lender | Interest and fees are set by accredited lenders and will vary by lender. | The interest is set by government at 2.5% per annum. No lender-levied fees. |
| Repayment terms | Repayment terms limited to a maximum of six years for term loan and asset finance facilities up to £5m. For overdrafts and invoice finance facilities, terms will be up to three years. The government will make a Business Interruption Payment to the lender to cover first 12 months of interest and fees payable. Principal repayment holidays are at the discretion of the lender. | Repayment terms are six years, but there are no additional fees for early repayment charges. The government will make a Business Interruption Payment to the lender to cover first 12 months of interest payable. The borrower has a 12-month principal repayment holiday. |
| Refinancing | Re-financing limited to a maximum of 20% of a lenders’ total CBILS lending. | There is no restriction on the total amount of the facility that may consist of refinancing. |
| Assessment of affordability and viability | Businesses must: • Have a borrowing proposal which the lender would consider viable, were it not for the current pandemic • Self-certify that it has been adversely impacted by the coronavirus (COVID-19) • Not have been classed as a ”business in difficulty” on 31 December 2019, if applying to borrow £30,000 or more. All lending decisions remain fully delegated to lenders. | The borrower is required to self-declare they meet the eligibility criteria for the scheme. Lenders do not have to assess a business’ affordability or viability. Lenders are not responsible for the borrower’s decision to borrow. |
| Borrower’s protection | All existing statutory rights (for example, Consumer Credit Act and FCA protections) apply. | Not subject to the many of the usual consumer protections that apply to business lending under £25,000. Borrowers do not have the benefit of protection and remedies that would otherwise be available under the Consumer Credit Act 1974. |
| Businesses eligible | Available to UK-based businesses with annual turnover of up to £45m per year. Smaller businesses from all sectors can apply for the full amount of the facility. However, fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment. | Available to most UK-based businesses, regardless of turnover. If the business is a “business in difficulty” as of December 31 2019 then businesses in agriculture, aquaculture or fisheries may not qualify for the full amount; and the loan cannot be used for export-related activities. |
| Personal guarantees | No personal guarantees for any facilities below £250,000. Other forms of security may still be required by the lender. Security, including personal guarantees may still be required for facilities above £250,000 but they exclude a borrower’s main home; and recoveries are capped at a maximum of 20% of outstanding balance. | No personal guarantees. No recovery action can be taken over a borrower’s main home or primary personal vehicle. For sole traders or partnerships, who do not have the benefit of limited liability, other personal assets may be at risk of recovery action. |
The British Business Bank advises which businesses meet the ‘business in difficulty’ criteria
A business is considered in difficulty if it met any one of the following criteria on 31 December 2019:
- Individuals or companies that have entered into collective insolvency proceedings;
- Limited companies which have accumulated losses greater than half of their share capital in their last annual accounts (this does not apply to SMEs less than 3 years old );
- Partnerships, limited partnerships or unlimited liability companies which have accumulated losses greater than half of their capital in their latest annual accounts (this does not apply to SMEs less than 3 years old);
- Where the undertaking has received rescue aid and has not yet reimbursed the loan or terminated the guarantee, or has received restructuring aid and is still subject to a restructuring plan;
- A company which is not an SME where, for each of the last two accounting years: i) your book debt to equity ratio has been greater than 7.5; and ii) your EBITDA interest coverage ratio has been below 1.0
The scheme is designed to give quick access to funds providing you meet the criteria. You could receive your loan within 24 hours of approval. You may repay early without incurring early repayment fees.
If you have any queries about CBILS, Bounce Back or any other Government assistance currently available to business owners during the pandemic, please contact (08000) 388 799 for the latest information, expert checked and verified.