The advantages of making use of for a second CBILS mortgage

Originally written about Small Business Financing Options

The Coronavirus Business Interruption Loan Scheme (CBILS) is proving to be a lifeline for businesses across the UK. The program was originally developed for those who have suffered lost sales or cash flow disruptions due to Covid-19. It can also be used by businesses to grow and develop. CBILS is part of a comprehensive package of government support for UK businesses and employees.

CBILS loans of up to £ 5 million are available with repayment terms of between three and six years. Companies with sales up to £ 45 million are eligible to apply. Funding of £ 4.97 billion has been approved since the program started in March 2020.

If you are one of the 82,000+ companies that have already received a CBILS loan, did you know you might be eligible for a second facility?

Who can apply for a second CBILS loan?

To be eligible for a second CBILS loan, you must meet the same criteria as for the first. For example, you need to show that your business would be profitable without Covid-19 and that it has been negatively impacted by the pandemic.

By applying for a second CBILS loan, your company can increase the cash flow it needs to alleviate ongoing financial challenges. Whether you have had to close temporarily due to the lockdown or are struggling to meet customer demand, applying for a second loan can be an option worth considering.

There are two important precautions to keep in mind:

  • You are only eligible for a second CBILS loan if you have not yet received a loan for the maximum amount available – 25 percent of your annual sales
  • The combined value of your two CBILS loans cannot exceed 25 percent of your company's annual turnover

For example, if your first CBILS loan is 10 percent of your company's annual sales, you may be able to borrow an additional 10 percent. You can apply to any of the 117 accredited lenders participating in the program, and you don't necessarily have to choose the same one as before.

Funding Options works with over 40 lenders who offer CBILS. To expedite the process, our financial specialists can match you with a lender suitable for your needs. The program ends on March 31st. So if you want to apply for a second CBILS loan, now is the time to do so.

What are the benefits of CBILS loans?

# 1 – Not interested for the first 12 months

CBILS-accredited lenders receive a government-backed partial guarantee against the outstanding balance of the funding, which means no interest is payable for 12 months.

There are also no arrangement / guarantee fees or redemption / early repayment penalties.

Of course, as with any type of business loan, you remain 100% liable for the debt.

When it comes to paying interest after the government-sponsored period is up, interest rates vary by lender. A funding options financial expert can help you compare interest rates to find the best one for you.

# 2 – No personal guarantees

Fortunately, insufficient security is no longer a requirement for access to the system.

Even if the lender believes you have adequate security, you may still be eligible for a facility. Additionally, there are no personal guarantees on loans under £ 250,000 so you don't have to worry about personal assets like your home being put at risk.

Depending on the lender, personal guarantees may still be required for facilities above £ 250,000. However, this cannot include your primary residence (PPR). Reclaims are limited to a maximum of 20 percent of the outstanding balance of the CBILS facility after the proceeds of the business assets have been used.

# 3 – Freelancers can apply

It is a misconception that only limited liability companies can apply for a first or second CBILS loan. As long as you meet the system / lender eligibility criteria and earn over 50 percent of your income from trading goods or services, you may be eligible. (Registered charities and educational organizations are exempt from this requirement.)

In addition to limited liability companies, the program is open to:

  • Sole proprietorship
  • freelancer
  • Corporations
  • Limited partnerships
  • Limited partnerships

# 4 – You can choose from several different loan types

CBILS lenders can provide up to £ 5m in term loans, overdrafts, bill finance and asset finance. The type of loan you apply for will depend on your company's needs and circumstances.

Here is an overview of each:

  • Term Loans – With a business term loan, the lender provides you with an amount of money that your company repays at a fixed rate with regular repayments
  • Overdrafts – An overdraft is a line of credit in your company's bank account that is used to increase short-term cash flow or to act as a financial "safety net".
  • Invoice Funding – This type of funding releases cash flow: the lender increases the value of your invoices for a fee so you don't have to wait for payments
  • Wealth Financing – Wealth Financing is a type of corporate finance that allows you to preserve assets, such as machinery or technology, by spreading the cost of it

Corporate finance to alleviate Brexit challenges

Of course, Covid-19 isn't the only challenge companies are currently facing.

Although the end of the Brexit transition period brought some degree of stability, many UK businesses continue to grapple with uncertainties – particularly when it comes to travel and trading in EU markets. During this phase of change, business owners may want to consider funding options that can ease the pressure and provide the financial headroom required.

Applying for corporate finance through financing options

You can apply for a second (or first) CBILS loan through the Funding Options platform.

Funding Options has been trusted by corporate executives across the UK and has been selected by the state-run British Business Bank as a platform for corporate funding. First of all, let us know how much money you want to borrow, what it is for and how quickly you need it. We compare over 120 lenders to give you the right financing options for your needs. It's free and doesn't affect your creditworthiness.

Apply for corporate finance

further reading

A Guide to Getting a Business Loan During Covid-19

The benefits of applying for a second CBILS loan

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