How to Refinance a BBL or CBILS loan?

How to Refinance a BBL or CBILS loan

What options are available to refinance a BBL or CBILs loans?

As most Bounce Back Loans (BBL) or CBILs loans are now being repaid or starting to be repaid it is a good time to consider whether or not a refinance of these types of loan are worthwhile.

When BBLs and CBILs were introduced many businesses applied for these types of loans primarily sold on the fact that the there was no repayments for 12 months. The added benefit was that these were also government guaranteed.

Now the 12 month period has ended the repayments for BBLs and CBILs begins. This for many businesses may not be affordable.

The options below relate to CBILs loans only. It is not recommended to look at refinancing of BBLs as the rate of interest is only 2.5% per annum. This was a “one off” rate and no refinance options can even come close to offering any benefit to the business. The pay as you grow options are highly recommended for all BBLs.

Refinance Options

1) Recovery Loan Scheme (Ends 30th June 2022)

The governments Recovery Loan Scheme may be used to refinance a CBILs loan as long as there is a benefit to the business for the refinance.

This option works well when the CBILs was provided over a short period of say 36 / 48 months and the refinance requires a longer term to reduce the monthly repayment. Recovery loans offer terms of up to 72 months so spreading the refinance over a longer period will help to reduce the monthly repayment*.

Example

£200,000 CBILS loan taken over 3 years (36months). First year is interest / repayment free which means the £200,000 has two years (24 months) left to be repaid which is £100k per year before interest is taken into consideration. This equates to £8,333 per month before interest is applied.

If this £200,000 loan was spread over 6 years (72 months) then the monthly repayment drops to £2,777 per month before interest is taken into consideration. A saving of over £5k per month.

It should be noted that switching from a CBIL to a RLS means that the government guarantee lowers from 100% to the current rate of 70%. Also the RLS scheme is due to end on the 30th June 2022 so this option is not available for a long time.

2) Business Loan

It may be worth considering converting a CBIL to a standard Business loan (secured or unsecured), however, this should only be done if there are benefits in doing so.

A secured business loan may offer a lower rate of interest compared to the CBIL. An example of this is when a secured loan of say 7.5% per annum can be obtained against a CBIL of 15%. The rate of interest is half that of the CBIL and therefore makes good sense to convert.

Again as per above should any CBIL be converted then the risk increases to the business as the government guarantee is removed. With a secured loan the asset put up as security would then be at risk. This is something that only you as a Business owner can decide upon.

3) Re-Mortgage

We are seeing more and more businesses looking to raise funds via a re-mortgage to repay their CBILs loan. This enables the loan to be spread over a longer period of time say 10 years. This can significantly reduce the monthly repayment amount.

If there is equity in a property then this could be released at a rate of between 2% – 5%. This can be far cheaper than the average CBIL loan which is around 9% – 12%.

Again as per above should any CBIL be converted then the risk increases to the business as the government guarantee is removed. With a secured loan the asset put up as security would then be at risk. This is something that only you as a Business owner can decide upon.

UK Businesses only

If you would like to discuss your options in more detail please click the link below. Alternatively please call 0161 8211478 to speak with one of our specialists.

In conclusion as members of the Financial Conduct Authority you can be assured of a great service.

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