image of a pile of coins with a plant growing out and the words Recovery Loan Scheme for website J&J Commercial Finance

Recovery Loan Scheme

 

Today (6th April) sees the launch of the governments Recovery Loan Scheme (RLS) which has replaced the Bounce Back Loans and Coronavirus Business Interruption Loan Scheme. The scheme, announced at the Budget on 3 March 2021, is scheduled to run until 31 December 2021, subject to review. So what do we know so far?

Details of the Recovery Loan Scheme

The maximum amount of a facility provided under the scheme is £10m per business (maximum £30m per group). Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.

Term length

For term loans and asset finance facilities: from three months up to six years.
For overdrafts and invoice finance facilities: from three months up to three years.

Interest and fees

These are to be paid by the business from the outset – There is no period of deferred payment or interest being paid for the borrower. This is one of the key changes from the prior schemes – Businesses are required to meet the costs of interest payments and any fees associated.

Turnover limit

There is no turnover restriction for businesses accessing the scheme.

Personal guarantees

Personal guarantees are not permitted for facilities of £250,000 or less. Above £250,000 the maximum amount that can be covered under RLS is capped at a maximum of 20% of the outstanding balance of the RLS facility after the proceeds of business assets have been applied. No personal guarantees can be held over Principal Private Residences.

Access to multiple schemes

Businesses that have taken out a CBILS, CLBILS or BBLS facility are able to access the new scheme, although the amount they have borrowed under an existing scheme may in certain circumstances limit the amount they may borrow under RLS.

Am I eligible for the Recovery Loan Scheme?

  • Covid-19 impact: The borrower must confirm to the lender that it has been impacted by Covid-19.
  • UK-based: The borrower must be carrying out trading activity in the UK.
  • Viability test: The lender will consider that the borrower has a viable business proposition but may disregard any concerns over its short-to-medium term business performance due to the uncertainty and impact of Covid-19.
  • Credit and fraud checks for all applicants: Lenders are required to undertake credit and fraud checks for all applicants, as well as customary checks such as Know Your Customer and Anti-Money Laundering. The checks and approach may vary between lenders.
  • Turnover limit: There is no turnover restriction for businesses accessing the scheme.

The following are not eligible under RLS:

    • Banks, building societies, insurers and reinsurers (excluding insurance brokers)
    • Public-sector bodies
    • State-funded primary and secondary school

What information do lenders require for the Recovery Loan Scheme?

When you apply for finance from RLS, you’ll need to provide certain evidence to show that you can afford to repay the lending, this is likely to include the following:

  • Management accounts
  • Business plan
  • Historic accounts
  • Details of assets

Decision-making on whether a business is eligible for RLS is fully delegated to the accredited RLS lenders. Individuals lenders might have additional requirements.

Accredited Lenders

18 lenders are currently accredited – it’s anticipated that more will become accredited over the coming weeks. To find out the latest list of lenders click here

More Information

We expect new lenders to be accredited over the coming weeks, improving access to the scheme. If you would like to be kept up to date with the latest news then visit our contact us page or for help applying with the scheme complete our online form

Choose your Buy to Let repayments wisely

Choose your Buy to Let repayments wisely

Borrowing money from the banks can sometimes have your head in a spin.

So many figures and numbers flying around that more often than not, you forget the ones that matter the most.

You’re repayments.

Or better yet, how you choose to repay your mortgage.

Are you going to chose standard repayments or interest- only?

It’s at this point that new investors start to stutter and stall.

Knowing the answer to this question could mean the difference to growing your capital or growing your portfolio.

You’re probably thinking, why does it matter so much?

 

Standard repayments.

This repayment type is made up of interest on the loan and a portion of the amount borrowed.

Over time, as more of the loan is payed off, the repayment amounts reduce and the equity in the property increases.

This type of repayment is structured so that at the end of the loan term, both the interest and the amount borrowed is paid off in full. The property is then owned outright.

Which may seem great. Not only are you generating an income but you’re tenants, are in effect, paying for your mortgage on the house.

 

Interest-only repayments.

With this repayment type, you are only paying the interest on the loan each month, not the amount borrowed.

At the end of the mortgage term you would pay the full amount borrowed.

If you wanted to retain the property you would need a plan in place to repay the original loan. This is usually done through selling or refinancing onto another Buy to Let.

This is also a great option, as it increases your monthly income. Investors can then use that income to invest in more properties. At the end of the term they could simply sell the property, hopefully for more than the original amount and retain the equity.

 

What are your objectives.

If growing your capital interests you, or you want fully owned assets to pass on to relatives, then standard repayments may be your better option.

If your looking at increasing your property portfolio and generate a passive income, than interest-only is one to take into consideration.

The question of which repayment option to take needs to be heavily influenced by what strategy you want to put in place for your property portfolio.

Talk to more experienced property investors.

The experienced investors I’ve recently come across, will mix the two types of repayments. Some of their properties will be interest-only to generate a larger income. Others will be on standard repayment types to create a larger capital. Chose wisely and get your strategy in place.

 

If you would like more information on Buy to Let mortgages feel free to contact us on 07399 660 002 – 01709 805 624 or alternatively you can drop us an email at info@jjcommercialfinance.co.uk

Lending for SME’s in 2021

Lending for SME’s in 2021

In past times of turbulence and uncertainty, lenders lack of confidence in the economy, results in them demanding more financial information from SME’s looking to borrow.

But in these times, the usual play book may no longer be viable.

The pandemic has hit even some of the healthiest UK businesses hard. Temporarily rendering past credit assessments from being able to determine a business’s potential to repay.

The success of the UK’s economy recovering will rely heavily on how quickly SME’s can bounce back. In order for this to happen, businesses will need access to capital.

Lenders may need to start moving more towards projection-led assessments. Assessing businesses based on how they will fare in a post-pandemic world.

Scoping the market for new providers.

Due to the pandemic, many traditional banks could potentially curb their lending in some sectors to mitigate concentration concerns.

This may lead to SME’s been turned down for lending by their banks. Even if the business itself is creditworthy. Forcing them to look for alternative finance providers for their lending needs.

CBILS has shown how quickly banks can diversify and this could really open up the market for businesses. SME’s may need to rely more on professional brokers and providers to scope the market in order to find the best solutions.

Summary

No doubt that the beginning of 2021 is going to be difficult for many businesses. With cash reserves become ever more strained, there may be more uncertainty to come.

Only businesses that are well-prepared and have the ability to adapt, will be able to see this through. However, this will require been more open to new providers and utilising the expertise of brokers and advisors.

It is going to be a bumpy ride, but if we stay optimistic, we may see a much brighter end to 2021.

Picture of business newspaper with title BBL & CBILs extended for website J&J Commercial Finance

BBL & CBILS scheme extended!

You may of heard that the Government Bounce Back Loans (BBL) and Coronavirus Business Interruption Loan Scheme (CBILS) have been extended with application now closing on 31st January 2020. With that in mind we thought we would provide an update on what’s changed since they were first introduced.

Bounce Back Loans (BBL)

The BBL were designed to be quick and easy applications allowing businesses to apply for funding for up to a maximum of 25% of their actual or predicted turnover for 2019 or £50k (which ever is the lowest). With a lower interest rate of 2.5% over the 6 year term and no repayments for the first 12 months the scheme was a life line to a number of businesses.

Eligibility

You must be

  • Based in the UK
  • Established before 1st March 2020
  • adversely impacted by coronavirus

Whats changed?

The length of the BBL was initially set at 6 years but you can repay early without any fees, before your first repayment is due the lender that you applied with will contact you about further options

  • Extend the term of the loan to 10 years
  • Move to interest only repayments for a period of 6 months
  • pause your repayments for a period of 6 months (subject to 6 months payments already being made)

Top ups – If you took out a BBL but borrowed less than you were entitled to, you can now top up your existing loan to your maximum amount. This request must be done with the lender that you already hold the BBL with and reflect your turnover stated in the original application – it will not extend the term of the BBL and repayments will start from 12 months from the initial loan being taken out.

How to Apply?

You should approach the lender that you have an existing relationship with for your business transactions. A number of lenders have stopped accepting applications from new customers. For top ups this is subject to minimum increase of £1,000 with a lot of lenders and you must ensure the details match to your initial application. If you do not have an existing relationship with one of the accredited lenders then it is proving extremely difficult to access the scheme.

Coronavirus Business Interruption Loan Scheme (CBILS)

CBILs was the first government lending scheme to go live following Covid-19 and as a result had a few teething problems in its early days. With the increase in lenders now offering CBILs it has made the scheme more accessible. CBILs can be used for Invoice Financing, Asset Finance and Term Business Loans.

What’s changed!

Its probably easier to say what hasn’t changed – the scheme has evolved significantly over the past 6 months making in more accessible. The key criteria is still 25% of turnover or your liquidity needs going forward. But what is clear it that those that were declined early on in the scheme now have options available again to them. The level of information needed has also reduced so bank statements and accountants in normally sufficient if looking at 25% of turnover.

How to apply?

J&J Commercial Finance work with a number of the accredited lenders for this scheme and can process applications on your behalf. As we know the lenders and the types of businesses and transactions they like we are able to place your application with the best lender for your circumstances. We will also work with your accountant to collate all the necessary pieces of information.

Businesses that have used the BBL scheme and require further funding can convert their BBL into the CBILs scheme – as long as the BBL is repaid as part of the application in affect refinancing the BBL whilst drawing additional funds.

 

Looking to apply or need more information then contact us on 01709 805 624 or email info@JJCommercialFinance.co.uk

The CBILs and BBL are schemes administered by the British Business Bank – further details about the scheme and the accredited lenders can be found on their website.

Are you missing out on the benefits of CBILS?

Are you missing out on the benefits of CBILS?

The Coronavirus Business interruption scheme.

You will have come across it, you may have applied for it before and have been turned down.

Maybe you dismissed it thinking your business didn’t meet the criteria.

Well, a lot has changed since CBILS first came out and with the deadline now extended to the end of January and another lock down to overcome. It’s time to give a second thought to whether this scheme could benefit your business.

Changes to the scheme has meant that smaller businesses effected by the coronavirus crisis can access the funds they need.

How the scheme works

When CBILS loans were first introduced, they were typically offered only by banks.

There are now over 100 lenders currently working to provide this scheme, including:

  • High-street banks
  • Challenger banks
  • Asset-based lenders
  • Smaller specialist local lenders

This enables a more varied form of lending, such as:

  • Term loans
  • Overdrafts
  • Invoice financing
  • Asset financing

As the scheme has grown, so have the options available to businesses.

This scheme gives lenders a government-backed guarantee for the loan should the applicant default on the loan. This means no personal guarantee is needed for amounts below £250,000.

Add on a period of NO repayments, NO early settlement fee and rates that are competitive with the majority being single figure rates*.

It’s easy to see why businesses are banking the loans as a ‘just in case’ safety net.

Applying for the loan

Many businesses may consider a CBILS loan to help with cash flow disruptions. CBILS loans can be used for a variety of other purposes including that safety net of cash to ensure that your business can make progress through the next 12 months.

Here at J&J Commercial Finance, we can help you with the application process and sift through the lenders to find the right one for you.

The application process for applying is simple and waiting on approval is now a lot quicker, with most businesses receiving a decision within the first 24 hours of application. Along with less documentation being required some lenders will only need annual accounts and bank statements!

Contact us or call on 01709 805624 or 07399 660 002

*Rates are dependent on the individual and business circumstances and subject to a full credit searched applications and underwriting by the lender