Small businesses warned to check they’ve got ‘the right’ coronavirus loan or face paying ‘twice as much’
SMALL businesses are being urged to check they've got the right coronavirus loan for them or face paying twice as much in interest.
Firms that rushed to claim help via the initial coronavirus business interruption loan scheme (CBILS) are typically paying higher charges than those who waited for the bounce back scheme, experts warn.
⚠️ Read our coronavirus live blog for the latest news & updates
But they could save thousands of pounds in interest by switching the loan to the bounce back scheme, where rates are fixed at 2.5 per cent.
Since launch, lenders have approved £34.9billion worth of coroanvirus loans to 830,000 businesses, according to new figures released today.
Of this, £23.8billion has been offered to more than 782,000 firms under the bounce back scheme.
While £9.56billion has been granted as business interruption loans, and the remaining £1.57billion has gone to larger firms via a separate scheme.
What help is there for businesses?
THERE'S a wide range of support available to companies during the coronavirus crisis.
- The government has offered to furlough workers through its Coronavirus Jobs Retention Scheme, paying up to 80 per cent of wages up to £2,500 a month
- While self-employed workers can get up to 80 per cent of profits paid by the government for the next three months - again up to £2,500 a month
- The Bounce Back loan scheme offers loans of up to £50,000, with the first year interest-free
- Under the Coronavirus Business Interruption Loan Scheme (CBILS), SMEs can get loans and overdrafts of up to £5million for up to six years and the government guarantees up to 80 per of these loans
- The Coronavirus Large Business Interruption Loan Scheme (CLBILS) offers support to companies with a group turnover of more than £45million
- Small firms can get grants of up to £10,000 to help with ongoing business costs
- VAT payments and self-assessment tax returns can be deferred for three months
- SMEs that cannot afford their tax bills can ask HMRC for a “time to pay” arrangement so any debt collection is suspended
- And they can get up to two weeks’ sick pay - almost £200 per employee for up to 250 staff members - refunded by the government.
- A 12-month business rates holiday has been introduced for many businesses
CBILS was launched first and came with a guarantee that 80 per cent of lenders' losses would be covered by the taxpayer if a borrower defaulted.
Simon Michaels, chief executive of business solutions at HW Fisher, said: "Many businesses who needed a smaller loan or indeed any size loan opted for CBILS because it was the only option at the time.
"Now that the bounce back loan has been introduced (£50,000 or less) those that had a loan of £50,000 or less through CBILS would be better of switching it to a BBL.
"The interest rate differential means a potential 50 per cent to 60 per cent variation in repayments between CBILS and BBL – a little known fact which banks do not seem eager to talk about.
"A cynical view would be that there is no incentive for banks to encourage a switch to Bounce Back Loans during the first 12 months – the interest will be paid at a higher rate by the government."
A spokesperson for banking trade body UK Finance said: "Any customer with a business interruption scheme loan or overdraft of £50,000 or less will be able to switch that facility to a bounce back scheme loan should they wish to do so over the next few months by arrangement with lenders.
"Pricing is only one aspect of the product and customers would need to consider other differences with their existing facilities."
While a Treasury spokesperson told The Sun: "Our various loan schemes, which have been introduced at speed and are available to businesses of all sizes, are helping hundreds of thousands of firms get through the crisis.
"All accredited lenders will allow customers who have been approved for Coronavirus Business Interruption Loan Scheme to transfer their loans into the Bounce Back Loan Scheme."
In April, banks were warned it's their turn to repay the favour and bail out small businesses - more than a decade after they were saved during the financial crisis.
READ MORE SUN STORIES
Yet a couple of weeks later, only 2 per cent of small businesses had received coronavirus loans.
Keen to apply for a bounce back loan? Here's all you need to know.