The Coronavirus Business Interruption Loan Scheme (CBILS) comes to an end on 31 September 2020. After this date, businesses affected by the Coronavirus pandemic will no longer be able to access these loans.
Small businesses have already secured £51bn in Government-backed business interruption loans, money used to support weakened cashflows as a result of the Coronavirus pandemic.
Businesses still have time to apply for a Bounce Back Loan or CBILS and can do this directly through one of the lenders registered with the British Business Bank or through a specialist CBILS broker.
The Government is reopening theatres, casinos and bowling alleys this weekend, as further steps are taken to reopen the economy post-Covid-19 lockdown. CBILS was introduced as much needed life support for those businesses that suffered trading loses due to the pandemic. One CBILS lender is now calling on the Government to extend the deadline for CBILS to Spring 2021 and to use this as a fund for generating business growth. ThinCats, an accredited lender under CBILS, has said it has seen an increase in firms looking to apply for CBILS to fund growth as opposed to survival.
Continuing with a Government-backed lending scheme after September will, according to ThinCats, prevent a potential “liquidity squeeze” in businesses. This suggests the lender believes loans to businesses could dry up without the Government sharing some of the risk of defaults with the lenders.
Over the next couple of months, businesses will be settling into a new Covid-19 shaped normality for their business. In the next six months, businesses may find they are responding to localised lockdowns or even looking for ways to return to growth. Access to business finance will be important in both scenarios. Should CBILS not be extended, what are the options for businesses that need to raise finance to improve their cashflow or invest in growing their business? We look at six ways to raise finance for your business:
Business loans are mostly used for medium to long-term finance. There are secured business loans, that require the borrower to have collateral against the loan, for example, cars, property or shares – these can then be used by the lender to recover the loan if the business defaults. Unsecured business loans are based purely on the borrower’s current situation and do not require the use of company assets as security. In some cases, an unsecured loan may also require a personal guarantee, and this can then be used by the lender to recover any monies not paid back by the business.
Speak to a loans broker to find out what is available in the market.
Invoice finance helps businesses with B2B customers plug gaps in cashflow usually due to revenue tied up in unpaid invoices. An invoice finance lender effectively buys the invoices from the business for anything up to 85% of the invoice value. The business gains cash quickly (with some lenders offering same-day cash advances) and in most cases, the business is also then protected from any invoices that are not paid.
A business bank account overdraft is a useful short-term credit facility. Businesses can access funds up to an agreed limit with their bank. In some cases, a business overdraft may incur an overdraft fee and interest costs. However, relying regularly on a business overdraft is not recommended, as banks can remove this facility at any time.
Moneyfacts has rated the best business bank accounts – see which brands got the five-star ratings. Starling Bank has two business bank accounts with five-star ratings – its Business Current Account and its Sole Trading Account.
Smaller businesses and those with employees that travel or incur business expenses use business credit cards as a convenient way to pay for goods and services. These cards offer an interest-free period, usually 30-59 days, and after this period, any outstanding balance accrues interest. Most business credit cards have a limit on how much can be spent on the card. For start-ups, a business credit card is a good way to build a positive credit history.
Moneyfacts has rated the best business credit cards – see which companies got the five-star ratings. Among those with a five-star rating include the NatWest Business Credit Card Mastercard and Business Plus Credit Card Mastercard. While the American Express British Airways Accelerating Business Card received four stars.
Those businesses looking to grow or reduce their reliance on landlords can consider a commercial mortgage to buy a commercial property. There are commercial mortgages up to 80% loan-to-value (LTV) available, however those businesses investing in property as an investment will find the maximum LTV available is likely five to 10 percentage points lower.
A commercial mortgage uses the property as security and therefore this is at risk if the business stops paying.
Speak to a Commercial mortgage broker to find out what is available in the market.
Those businesses wanting to invest in equipment can use asset finance to secure the equipment they need. A common form of asset finance is hire purchase. This is where the lender procures the equipment and the business then hires this until the full debt is paid, at which point ownership transfers to the business. Leasing options are also available and sometimes businesses can raise finance against assets they already own.
Read our full guide 4 steps to make your business a success, which includes a table of a range of business finance options.
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