There’s no doubt about how the COVID-19 affected the majority of the population, with the working community and the business industry taking a heavy hit.
It’s unfortunate to see many business owners forced to close their businesses as the pandemic pushes them to the edge. This resulted in massive lay-offs and furloughs. However, in the middle of this health crisis, we also see how resilient everyone is.
While many lost their source of income, some are striving to survive and have found ways to compensate. This might be a tough time, but there’s always a ray of hope, and thankfully there are still few lending options available for people, especially those who are jobless, to keep afloat.
Learn what these lending options are as they may help your business to thrive during this troublesome year.
Applying for a personal loan is still one of the best and easiest to access lending options even in the middle of the pandemic. It is one of the most in-demand loan options not only in the UK but in other countries such as the United States and Spain.
Personal loan offers have the most affordable interest rates for the amount you borrow both in UK and US lending institutions. Though there are other lending options such as credit card financing, unsecured loans, and payday loans, a personal loan is still considered as the easiest to manage.
The flexible payment terms are what every borrower looks for and you can even calculate the interest from the amount of money you owe using an online loan calculator. Further, the repayment scheme is manageable compared to other lending options.
According to the Financial Conduct Authority (FCA), receiving financial help this year from various borrowing institutions like banks and credit unions is still available. However, as per FCA, everything needs to be regulated to help both the financial firms and the borrowers. They have laid out rules and processes that these lending institutions should follow.
For anyone who took out a personal loan during the pandemic, here are the FCA guidelines for financial firms:
- Offer flexible payment options
- Give a realistic repayment timeline
- Provide tailored and suited support
- Create sustainable payment plans
- Assist in keeping the balances under control
- Handle vulnerable customers
If you’re interested in taking out a personal loan for whatever reason it may serve, for personal expenses and consumption or to finance your business, FCA highly supports each individual.
Their goal is to see everyone get through this pandemic and slowly get back to our feet.
Government Scheme Aid Loans
If you have exhausted your loan, the UK government offers and provides aid loans that are specifically designed to help business owners. This is a result of how COVID-19 affected both big and small enterprises in the country.
To keep everyone afloat and to assist struggling business owners, the UK government had laid out government scheme aid loans to all businesses that were experiencing disrupted cash flow and lost or deferred revenues due to the coronavirus outbreak.
To fully understand what these government aid loans are, we have briefly documented the three and list down what they can offer.
Coronavirus Business Interruption Loan Scheme (CBILS)
The CBILS was created in the face of the pandemic last March 23, 2020. This is the instant reaction and resolution the UK government has made to keep up with the rapid effect of the pandemic on the business sector.
The government has a budget that will cover up to £5 million to aid smaller UK-based businesses. For term loans and asset or invoice finance facilities, businesses can borrow £50,001.
The CBILS main loan characteristics are the following:
- For term loans and asset finance facilities, payment terms are up to six years while
- For overdrafts and invoice finance facilities, the government gives leeway for up to three years
Coronavirus Large Business Interruption Loan Scheme (CLBILS)
The CLBILS, on the other hand, is similar to the CBILS. However, it’s more focused on large enterprises. This means, the government also laid out a bigger budget for business owners who’ll file for a CLBILS loan aid. The potential funding made by the UK government for CLBILS is as follows:
- They can offer the business borrower an amount up to £25 million for a group turnover of up to £250 million
- And for a group turnover that is greater than £250 million, they can offer up to £200 million in funding
All of these borrowing schemes have a solid ground of rulings that are solely tailored for UK businesses and bound to eligibility checks before the funding will be released.
Bounce Bank Loan Scheme (BBLS)
Lastly, the BBLS is designed to help small businesses that were looking for financial aid to extend their business enough to survive the current pandemic. The BBLS has the least funding since it’s target clients are micro-businesses that require smaller loans. BBLS can offer from £2,000 up to a maximum of £50,000.
The government will cover 100% of the loan. And borrowers don’t need to pay any fees or interest for the 12 months. After the period, the interest rate will be 2.5% a year, and the loan term extends up to six years.
Comparing UK and US Loan Schemes
Like the UK government, the US is looking for ways to provide for its people. Here are a few comparisons of the two when it comes to their loan schemes.
Just like how the UK offers CBILS, BBLS, and CLBILS, the US government also offers loan options with the same terms, albeit named differently.
- EIDL (Economic Injury Disaster Loans)- This type of loan is given to small businesses and nonprofits that are temporarily experiencing a loss of revenue due to the pandemic. It is a very similar loan scheme to UK’s CBILS in that it targets small businesses.
- SBA Express Bridge Loans – This is another alternative for business owners who have a pending request for EIDL. If they have an urgent need for cash to bridge financial gaps, they can apply for SBA Express Bridge Loans.
- Paycheck Protection Program – This loan scheme is quite similar to BBLS. However, the loan’s sole purpose is to cover expenses relating to payroll costs, interest on mortgages, rent, and utilities.
This is truly a difficult time not only for the employment sector but also for the business sector. Struggling business owners are trying to look for ways to keep their businesses afloat and to keep their workers paid.
Thankfully, the government is persistent to keep the business sector and created aid loans to assist them slowly get back on their feet. It will be a struggling year for everyone, but together, we can see through it. These lending options are just one of the ways to help each other survive this challenging year.