What are your options for repaying CBILS and BBLS?
By Jonathan Rubins, Director at Alternative Bridging Corporation
It’s important to remember that the government’s coronavirus schemes were not all giveaways. The Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS) were both hugely popular. By the end of this March more than 98,000 CBILS loans had been approved, worth a total of £23.28bn and more than 1.5 million BBLS loans had been approved worth a total of £46.53bn.
Both schemes have now come to an end, and while they proved successful at pumping billions of pounds into the economy, they will still need to be paid back. In fact, the first payments are now becoming due on many of the loans.
We know that many property investors applied for these loans, using the limited companies with which they run their investment portfolios. Many did so as a precaution – the future was very unclear this time last year, so many investors decided to accumulate a war chest, even if it wasn’t to be required.
For some, the loans would have been necessary to maintain their cashflow. Rental arrears have mounted over the last year while tenants have been protected by the enforcement moratorium and many landlords have found themselves out of pocket. Other investors may have used the loans to pay off other forms of finance or even deployed the capital on new opportunities.
If you fit into any of these categories you are probably considering your options. As with all of these things, the best option for you will depend on your individual circumstances, objectives and concerns. Many investors who have held the balance of CBILS or BBLS as a war chest may decide they want to repay that entire balance now, while others may choose to use the funds to finance a new opportunity and repay the balance over the term of the loan. This will require a monthly outgoing, however, and if managing cashflow is a consideration, there are other options.
For example, a property investor who wants access to capital but doesn’t want to have to manage monthly payments could choose to refinance one of their properties with a bridging loan, either as a first or second charge. They could raise enough to pay off the CBILS or BBLS balance and potentially more to provide them with funds that they could then use to invest in their portfolio. With a bridging loan the interest doesn’t have to be serviced as it’s repaid on exit of the loan at the end of the term and so investors can free up working capital and control their cashflow.
There is also another option. At Alternative Bridging Corporation, we offer a product called the Alternative Overdraft, which is a pre-agreed loan agreement, where some or all of the balance can be drawn down and repaid on multiple occasions. On a product like this, interest is only charged on the balance that has been drawn down, so it gives investors the flexibility to deploy and pay back capital as and when is required. This way they can draw down enough at the outset to repay their CBILS or BBLS balance whilst giving themselves the opportunity to access more capital should they need it, and only at the time they need it. Needless to say, this is a more efficient approach to borrowing that drawing down the entire available balance at once and holding onto it until it’s required.
So, if you did take a CBILS or BBLS and your repayments begin soon, think carefully about your options, how much capital you think you will need in the short term and how you want to manage your cashflow
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