The effects of COVID-19 in 2020 have been disastrous for many businesses in the UK (and around the world). We can safely say it’s been a pretty sh*tty year for a lot of people. But thankfully financial help is available for a large number of eligible businesses.

If you’ve successfully navigated your business through the last few months of the pandemic, well done!

If you’ve successfully navigated your business through the last few months of the pandemic, firstly well done! It’s been a challenge, so great job getting through these very tough times. Secondly, the government now has two schemes to help your business get back on its feet:

• Coronavirus Business Interruption Loan
• Coronavirus Bounce Back Loan

Coronavirus Business Interruption Loan

This was the first government scheme launched out of the two. It’s based on the same scheme that’s been in place since the economic crisis of the late 2000s. The highlights of this scheme are:

• Loans of up to £5 million
• 80% guarantee provided by the government (personal guarantees may also be required for loans over £250k)
• Any interest and fees are settled by the government for the first 12 months
• Your business must be based in the UK and have an annual turnover of less than £45 million to be eligible.

How to apply

The application process for the CBIL scheme is a bit of a pain. On top of providing your usual sets of accounts, management accounts and forecasts, the majority of banks are asking for comprehensive lists of amounts owed to and from the company, as well as registers of directors personal assets.

In some cases it can be up to 5 sets of forms to fill out. But if it’s going to make the difference to the survival of your business then it’s worth taking the time to apply. The scheme works but just be prepared for a slightly painful process to get the money in your account.

Find out more about the Coronavirus business interruption loan and to apply go to Gov.uk.

Coronavirus Bounce Back Loan

The Bounce Back Loans are aimed at smaller businesses, compared to the business interruption loans. The highlights of this scheme are:

• Loans of £2,000 to £50,000 over 6 years (max 25% of turnover)
• Fixed interest set at 2.5% for all loans
• 100% guarantee provided by the government
• Any interest and fees are settled by the government for the first 12 months
• No repayments due for 12 months
• No early repayment charges

Eligibility is a bit more specific for this scheme so we recommend reading up here. Though one important point to note is that you can’t apply for a Bounce Back Loan if you’ve already had a CBILS loan.

How to apply

The application process for a Bounce Back Loan is much easier than the CBILS loan. You’ll need to answer 7 questions, which are all pretty straightforward but you’ll need to know your annual turnover when applying.

The great thing is that some banks can give a same-day payment for the loan payment, so you shouldn’t be waiting weeks for the money.

Find out more about the Coronavirus Bounce Back Loan scheme and to apply go to Gov.uk.

Which loan is best for my business?

Firstly, it’s important to stress that both of these schemes are loans not grants, so they will need to be paid back. Before applying for either loan, speak to your accountant to make sure that it’s the right decision for you, and that you’ll be able to afford repayments.

Read up, discuss the options with your accountant and make a decision you feel comfortable with.

As for choosing between the two, if you need less than £50k then the Bounce Back Loan would probably be your best bet. It’s quick and easy to apply, and with an interest rate of 2.5% you won’t find a cheaper loan elsewhere.

If you need more than £50k, or may do in the future, then applying for a Bounce Back Loan would prevent you from applying for a Business Interruption Loan later on. Take time to read up on the two options, discuss the details with your accountant and make an informed decision that you feel comfortable with.

Check out our blog for more tips, tricks and advice to help your startup succeed.