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When Cumbria Chamber of Commerce launched its coronavirus survey in March, the biggest problem facing businesses was cash flow.

Businesses that had stopped trading because of lockdown, or were operating at a much-reduced level, were struggling to pay their bills.

Chancellor Rishi Sunak responded by unveiling various loan schemes, wholly or partially underwritten by the Government, designed to keep businesses afloat. To date, more than 1.2m businesses have taken advantage.

By far the most popular is the Bounce Back Loan Scheme (BBLS), which has provided 1.34m loans totalling £40.2bn as of October 18.

This allows small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover. The maximum loan is £50,000.

There are no fees, no personal guarantees, no interest to pay for the first 12 months and no requirement to start repayments for 12 months. The interest rate from year two onwards is fixed at 2.5%.

Chancellor Rishi Sunak has announced enhancements to the scheme. The loans can be repaid over 10 years (previously the maximum term was six years). Interest-only periods of up to six months and payment holidays will also be available.

Banks have taken a laissez-faire attitude towards BBLS lending because the loans are fully guaranteed by the Government – the lender doesn’t lose out if the borrower defaults. Official figures show that 80% of loan applications are successful.

However, as far as we’re aware, lenders are only accepting applications from businesses that bank with them. HSBC was accepting applications from businesses that bank elsewhere but is no longer doing so.

The scheme will close on November 30. However, we’re advising businesses to apply well before then to ensure their application is processed in time. We don’t anticipate that banks will be given extra time to process loans in the pipeline.

Watch this video to learn more about the scheme:

SMEs needing to borrow more than £50,000 should consider the Coronavirus Business Interruption Loan Scheme (CBILS).

CBILS offers advances up to £5m. Like the BBLS, they are fee-free and interest-free for 12 months. The advance can be in the form of term loans, overdrafts, invoice finance or asset finance.

The Government guarantees 80% of the loan so reducing – but not eliminating – the risk to lenders. That makes them a little harder to get hold of, only 46% of loan applications are successful.

Lenders will not demand personal guarantees for loans under £250,000.

The Chancellor has extended the period of the Government’s guarantee from six years to 10 with the intention that lenders will allow borrowers to reschedule payments over 10 years if they need to.

Although the take-up has been relatively small compared with BBLS –  73,000 loans granted with a total value of £17.2bn  – CBILS is a great scheme for businesses needing to borrow larger sums.

Maria Ramsdale, an Investment Executive at FW Capital, one of the accredited CBILS lenders, said: “Whether they need additional funding to help with cash flow, bring back furloughed staff or make adjustments to their business model, a CBILS-backed  loan could help businesses on the path to recovery.Maria Ramsdale

“A-CBILS backed loan could provide Cumbrian businesses with a much-needed lifeline during this unprecedented period of uncertainty.”

The deadline for applications is November 30.

CASE STUDY: Read how the Haweswater Hotel took advantage of CBILS to avoid going into administration and take the business to the next level.

CBILS and BBLS will lend only to SMEs. Larger businesses should look at the Coronavirus Large Business Interruption Loan Scheme (CLBILS), which offers advances up to £200m to businesses with a turnover of more than £45m.

Like CBILS, 80% of the advance is guaranteed by the Government and lenders will not ask for personal guarantees for loans up to £250,000.

Finance is available in the form of term loans, revolving credit facilities (overdrafts), invoice finance or asset finance. The maximum term is three years. Nationally, 623 loans totalling £4.6bn have been granted so far.

Companies borrowing more than £50m through CLBILS are subject to restrictions on dividend payments, senior pay and share buy-backs during the period of the loan.

Again, the deadline for applications is November 30.

There’s another initiative worth mentioning, the Future Fund, which offers convertible loans to businesses driving innovation.

Under the scheme, the Government match funds investment from one or more investors up to a maximum of £5m. The minimum amount is £125,000.

The loan matures after three years when it can, in certain circumstances, be converted into shares in the company. So far 745 businesses have taken advantage of the scheme, drawing down finance totalling £771m.

The deadline for applications is November 30.

Growth Hub advisers can help eligible businesses with applications for all these schemes, in particular for CBILS where getting your application right greatly improves your chances of securing the loan.

And while this article is about the Government schemes launched in response to Covid-19, we can also direct you to other sources of finance such as the Northern Powerhouse Investment Fund. More here.

Call us today on 0844 257 84 50 or email and start a conversation on how we can help your business to survive and thrive.