So now we know.
The CBILS and Bounceback loan schemes will definitely end on 31 March 2021 and be replaced with Recovery Loans, which are to be launched on 6 April 2021. These loans will be provisionally available until 31 December 2021, although we are tantalising told this will be 'subject to review'.
Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.
The government will guarantee 80% of the finance to the lender. No personal guarantees will be taken on facilities up to £250,000, and a borrower’s principal private residence will not be able to be taken as security.
In the absence of any information to the contrary, we expect repayment profiles to be traditional, namely without any capital and interest repayment holidays.
There is no official communication on the interest rate and the fees that will be applied, and whether these will be set by the lender or the government. The Financial Times reported last weekend that interest rates could be as high as 15%.
Loans will be available through a network of accredited lenders, whose names will be made public in due course. We will be monitoring this closely and will provide an update as soon as we know.
A replacement for the CBILS and Bounceback loan schemes was a certainty, it was really just a matter of what form it would take.
The rushed launched of CBILS and BBLS led to several changes in the terms and conditions of these loans, but we don't expect the same mistakes to be made again. What we see now is what we will get. This new loan will have been a long time in the planning and the elements of its predecessors that have been retained are plain to see.
We hope and expect that the panel of accredited lenders will be broad when it is published and will have many similarities to the list of accredited CBILS and BBLS lenders. We could even see it expanded as more specialist asset finance and invoice finance lenders are added.
For the borrower, the absence of a personal guarantee is always going to be persuasive and we could see non-accredited lenders increasingly dropping this requirement in order to compete. We might also see other product innovations introduced by non-accredited lenders for similar reasons. More flexible repayment profiles is one area that springs to mind.
Only the cost of the Recovery Loan remains uncertain and we feel sure this will be competitive, albeit not at the bargain level of 2.5% as comes with the current BBL.
Underwriting will be mandated to the lenders and we believe this is likely to be quite stringent even though there is the backing of the government guarantee in the background. This will be very different from the Bounceback Loan where there has to be a very good reason for the lender to say no.
If you are a potential borrower, our advice remains to grab a Bounceback Loan or CBIL while you can. There is unlikely to be such cheap and accessible credit available again in our lifetimes. You can find out which type of loan you are eligible for and the terms on which you can borrow by using our quick government loan scheme eligibility checker.
Once the shutters come down on CBILS and BBLS, it will be a case of assessing the Recovery Loan vs. equivilent facilities from non-accredited lenders. We will be on hand to help you with that decision and support you with your application. Please get in touch for an informal and impartial chat.