The Coronavirus Business Interruption Loan Scheme (CBILS) was introduced in March 2020* by the UK Government as a temporary relief measure for smaller businesses whose revenue and cash-flow were negatively impacted as a result of the national lockdown.
*The initiative closed for new applications on 31 March 2021.
However, whilst many businesses have explored and taken out such financing options in good faith, the trading environment has not fully recovered, and numerous are now stuck with arrears and interest on the loan building up. Furthermore, it is important to fully understand the entirety of the guarantee being offered; the government does not guarantee 80% of the loan, but rather guarantees the bank’s losses after normal recovery processes have taken their course. This means that borrowers are still 100% liable for their loans.
Our lawyers can provide advice on rescue and recovery and protection solutions if you are struggling with CBILS related debts caused by the pandemic.
Frequently asked questions
What does the most recent CBILS data suggest?
Published in the Department for Business, Energy & Industrial Strategy’s Annual report 2021, data indicates that almost 88% of all repayments on CBILS facilities are on schedule, and 11% have been paid back in full. The remainder of the borrowers are either in arrears or have defaulted.
The report notes, however, that these statistics are subject to any changes in market conditions or individual circumstances. As such, fluctuations are expected in the future.
When does the loan need to be repaid?
The Government will have paid the interest accumulated for the first 12 months after you have been approved, as well as any initial upfront fees. After this initial interest-free term, you will have been required to make interest payments as you would with any other loan in accordance with the terms of the loan agreement. The interest rates will vary between lenders depending on the specific lending proposals.
When should I start repayments?
If you can afford to, you should start making repayments earlier to reduce any necessary fees and interest charges. There are no early repayment fees with CBILs, unlike with some loans, which means that if you chose to take the 12-month repayment holiday, you would ultimately pay more interest as there will be a larger amount of capital outstanding for a longer time. It is recommended to start repaying the loan as soon as you are able to as it will be a beneficial option to help avoid paying additional interest.
What are the consequences of not repaying?
You risk your credit rating being affected at the bank which can limit your attractiveness to future lenders or investors in the long term.
As a Director, will I be liable for any non-payment?
Directors will not be personally liable for the loan, but if you are found guilty of abusing the scheme you could be found guilty of fraudulent trading.