COVID Business Interruption Loan
The Coronavirus Business Interruption Loan Scheme, or CBILS for short was part of the UK’s government’s response to the coronavirus pandemic was to offer government backed loans to support business cash flow.
If your company is has serious debt and can’t afford to repay, your risk of personal liability for a CBILS loan depends on whether you’ve provided a personal guarantee, and whether you have wrongfully or fraudulently traded, for example, abusing the scheme.
What is a Business Interruption Loan
What is the Business Interruption Loan
Two schemes were introduced by GovUK: The Bounce Back Loan Scheme (BBLS) and the Coronavirus Business Interruption Loan Scheme (CBILS). They provided a source of emergency funding to help businesses stay afloat during the COVID-19 pandemic.
The CBIS was a scheme to help small and medium-sized businesses to access loans and other kinds of finance up to £5 million. The government guaranteed 80% of the finance to the lender and pays interest and any fees for the first 12 months.
For loans under 250k, personal guarantees were not required. For loans over £250,000, lenders may have demanded a guarantee but it cannot be secured on a director’s Principal Private Residence, and is limited to 20% of the debt.
The borrower always remains fully liable for the debt.
Options for CBIL Debt
Options for CBIL Debt
If you are unable to pay back your Bounce Back Loan, there are a number of steps you can take to address the situation. Here are some steps you can consider:
Contact your lender: If you are having trouble making your repayments, the first step is to contact your lender. Explain your situation and request one of the following:
Request an extension of the loan term to 10 years from six years, at the same fixed interest rate.
Seek debt advice: If you are struggling with debt, it can be helpful to seek the advice of a business adviser or debt adviser. They can help you understand your options and create a plan to manage your debts.
Request forbearance from the lender: If you are unable to repay your CBIL in full, you may be able to agree forbearance, this is up to the lender to consider.
Consider insolvency proceedings: If you are unable to repay your CBIL and other debts, you may need to consider insolvency proceedings. This could involve entering into an individual voluntary arrangement (IVA) or filing for bankruptcy for sole traders and partnerships or Voluntary Liquidation or business rescue options for limited companies.
NB. You won'r be able to dissolve your company with an outstanding CBIL. You need to get legal advice if you are subject to a personal guarantee.