6 myths about CBILS loans

Updated 17/12/20:

Today, the Government announced a further extension to the Coronavirus Business Interruption Loan Scheme (CBILS). While the scheme is now due to end 31st March 2021, there are still many small businesses that have yet to take advantage of the scheme. Having spoken with thousands of businesses, we’ve noticed there are some common misconceptions about the CBILS scheme, so here, we help you separate the fact from the fiction.

1. CBILS is a Government grant

While Government grants are available to some self-employed individuals, the Coronavirus Business Interruption Loan Scheme (CBILS) is a Government loan scheme, not a grant. This is the result of some confusion regarding the 80% Government guarantee that CBILS loans offer, however this guarantee is only for the provider, and not the business. Business owners that take out a CBILS loan are still liable to repay 100% of the loan.

2. I can only apply for a CBILS loan at a bank

When CBILS loans were first being rolled out, they were typically offered only by banks, which led many small business owners to believe that this was the only place you could get them. As the scheme has grown however, there are now many more options available.

Funding Circle is one of these alternatives accredited to offer CBILS loans. While the standard CBILS offering includes benefits such as the Government paying the first 12 months of interest and upfront fee on your behalf, as well as no personal guarantees on loans up to £250,000, Funding Circle CBILS loans offer additional benefits. These include:

• No repayments for the first 12 months
• No early settlement fees

As details of the offering can vary from provider to provider, it’s definitely worth shopping around to find the deal that best suits you.

3. CBILS loans are expensive

CBILS loans can actually work out to be more cost effective because the Government pays the first 12 months of interest (where interest is typically at its highest) and upfront fee on your behalf. This could save you in the region of hundreds, or even thousands of pounds, in comparison to a non-CBILS business loan.

Because Funding Circle CBILS loans offer no repayments for 12 months and no early settlement fees, this effectively means that if you can repay your loan in full before the end of your first year, it won’t have cost you anything.

4. It takes months for a CBILS application to be approved

Since  there has been a lot of press coverage regarding long waiting times for CBILS loan approvals through banks, many small business owners presume that CBILS loans generally take a long time to approve. However, this is not the case — at Funding Circle, 60% of our applicants receive a decision in less than a minute, while 74% receive a decision* within 48 hours. 

We’ve simplified our application process too. 48% of our applicants don’t need to provide bank statements to complete their application. This speeds up the application process, making it quicker and easier to apply for a CBILS loan through us.

5. CBILS loans require a personal guarantee

As part of the CBILS loan scheme, the Government requires that personal guarantees are not required on loans under £250,000. 

In addition to this, for Funding Circle customers who have an existing loan with us and wish to refinance, we will also cancel any existing personal guarantee in place once their CBILS loan is approved. However, it’s important to remember that we do require personal guarantees on loans of £250,000 to £500,000.

6. I can only use a CBILS loan for working capital

While many businesses may consider a CBILS loan to help with cash flow disruptions, a CBILS loan can also be used for a wide variety of other purposes. You could invest in your IT systems, train staff, buy new equipment, or to refinance your existing debt. 

With refinancing, because CBILS loans can be more cost effective than the high rates of interest you might find on overdrafts, credit cards or existing business loans, using your CBILS loan to refinance these could help you save money in the long run. To learn more, check out our guide on refinancing with a CBILS loan here.

* Data from CBILS applications between 12th May to 15th July 2020.

It’s important to remember that when taking a loan your business is liable for the full loan amount. The CBIL scheme provides a guarantee to the lender, not to the business.

The Coronavirus Business Interruption Loan Scheme (CBILS) is managed by the British Business Bank on behalf of, and with the financial backing of the Secretary of State for Business, Energy and industrial Strategy (BEIS). Full details on CBILS eligibility criteria and the list of participating CBILS lenders can be found on the British Business Bank website.

All information is correct at time of publishing. While we want to help as much as we can, the information and documents found here are provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.