Why you need to act now over CBILS and BBLS

Why you need to act now over CBILS and BBLS

Businesses facing repayments on their government coronavirus loans need to act now over CBILS and BBLS.

Many businesses are still facing issues due to disruption from the outfall of restrictions. As a result, owners and directors are considering the future and maybe thinking of closing their business.

If they decided to use the Coronavirus Business Interruption Loan Scheme or the Bounce Back Loan Scheme repayments will be due, if not already.

Continuing uncertainty this winter means more businesses are struggling to pay back their loans. And they are learning that ‘government-backed’ isn’t the government protecting them.

Even if business owners haven’t signed a personal guarantee, they could be at risk. Here’s what you need to know about the schemes.

Repayments

  • Initial interest-free term & upfront fees. Rates vary between lenders and depend on the specific lending proposal. The government pays the interest for the first 12 months after you are approved. They also cover initial upfront feeds. Once the interest-free term has ended, you need to make interest payments just as you would with any other loan.
  • Repayments. CBILS and BBLS offer a 12-month repayment holiday but once that time has lapsed, you must make repayments on loans and interest. If you can afford to, make repayments as soon as possible to reduce any unnecessary fees and interest charges. There are no early repayments fees for CBILS and BBLS loans.

What if you can’t repay?

Initially, businesses took out the loans to see them through the early months of the pandemic. Few envisaged needing continued help as further restrictions hit them badly.
As a result, turnover and cashflow have taken a massive hit and this could mean facing unexpected difficulties when repaying both coronavirus support loans. Remember, that ‘government-backed’ doesn’t mean they will cover repayments, so you must act now over CBILS and BBLS.

  • Corporate liability. A lack of due diligence from the government means many ‘unviable’ companies received loans. If your company cannot pay back the loan, there will be no consequences if you acted ‘reasonably and responsibly’. It is not currently clear what that means. Not being able to pay can risk your credit rating.
  • Personal liability. If directors’ personal guarantees were used to back up CBILS loans over £250,000, these directors are liable. To recover their money, lenders must show that they have exhausted all possible recovery channels, including liquidation, repossession of assets and even bankruptcy. Directors may still be held personally liable for loans under £250,000!

New Insolvency Service powers

From the beginning, there was concern that a small minority may misuse the CBILS and BBLS programmes. As a result, the Insolvency Service is investigating disqualified directors to make them liable for company debts.
This new was designed to prevent:

  • The dissolution of companies to avoid investigation into the directors.
  • Pre-pack administration.
  • Use of the company dissolution process as an alternative to form insolvency proceedings.

If you are planning on dissolving a limited company, you could find yourself being investigated, especially if you have a CBILS or BBLS loan. The new powers mean any company dissolved in the past three years can be investigated.

Act now over CBILS and BBLS

If you find yourself unable to afford your CBILS or BBLS repayments, the worst thing you can do is bury your head in the sand. Don’t put it off, speak to a professional. It’s best to speak to experts, such as us here at Guidon Group, for advice. Click here to book a free discovery call.