How To Check You’ve Got The Right Covid Loan?
Small businesses across the country are being urged to check whether they have the right COVID support loan.
Experts believe that not getting this right could cost your business twice as much in interest!
Do You Have The CBILS?
The Coronavirus Business Interruption Loan Scheme (CBILS) was the first piece of support to be released.
Obviously, business owners flocked to it, ensuring that they had the support they needed during this turbulent time.
However, it’s being reported that some small businesses have taken out one of these loans with an interest rate of 6%. The loan came with a guarantee that 80% of the lender’s losses would be covered by the taxpayer.
Do You Have The Bounce Back Loan?
A few weeks after the CBILS loan scheme was released, the government announced another loan scheme: The Bounce Back Loan Scheme.
The maximum a business can loan through this scheme is £50,000 or 25% of their turnover (whichever is less).
The Bounce Back Loans are fixed at 2.5% interest and guarantee to cover 100% of the lender’s losses.
Those two interest rates are the key information that business owners need to investigate.
How Much Is Your Interest Rate?
If a small business took out a Bounce Back Loan of £50,000 (the maximum available) at the fixed 2.5% interest rate, they would pay £1,250 a year.
However, if a small business took out a £50,000 CBILS loan (max available is £5 million) at a 6% interest rate, this would cost them £3000 a year.
As you can see, you’re paying double for the same amount of money!
What Should You Do If You Need To Change?
If you have taken out a CBILS loan, but haven’t borrowed more than £50,000 – the best thing to do would be to speak to your lender and get switched over to a bounce back loan as soon as possible.
On a Bounce Back Loan, the first year is interest-free, so if you paid it all off in the first year, you wouldn’t lose out on any money.
The deadline for switching schemes is November 4th 2020.
If you have loaned more than £50,000 then the best thing to do would be to stick with your CBILS loan scheme.