Financing for the future

The Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBL) were introduced by the Government to support businesses through the COVID-19 crisis. The low rates of borrowing on the schemes and ease of access to the funding has resulted in large numbers of businesses accessing the money for a variety of reasons.

These loans are of course repayment free for the first 12 months but essentially revert to a five-year capital plus interest loan once the 12-month period expires. It should be noted that if you have not yet taken advantage of these schemes, then you have until 30 September 2020 to secure additional funding through CBILS and 4 November 2020 for BBL. The Government retains the right to extend these deadlines, but nothing has been announced regarding an extension at the time of writing.

Therefore, we expect to see a lot of refinancing applications from Spring 2021 to Summer 2021. Of course, you may have pre-existing debt as well which will need to be factored into your request and other factors that will affect your decision. We suggest you consider the following:

• Banks will be inundated with requests next year so give yourself enough time to make changes.
• You’ll need projections, budgets and historical analysis to support your applications and to demonstrate you can afford the loan.
• Restructured loans will revert to traditional terms – are they sufficiently secured and is there enough income to service the debt?
• Match the debt structure to your requirements. Working capital is best serviced by an overdraft whilst property-based loans are better suited to longer term.
• As you look to restructure your debt, have you considered if some of your key assets are sufficiently protected from business risk?
• Negotiate on securities and personal guarantees.
• Remember there are alternatives, for example asset finance, outside equity injection, etc.
• Doing nothing is most certainly an option.

The structure of your finance is a key decision with many other related issues to factor into the thought process. Our Corporate Finance specialists would be happy to offer our advice and support so please get in touch via corporatefinance@eqaccountants.co.uk or call one of our offices today.