The Coronavirus business interruption loan scheme is pretty well known. It seems to have been extended more times than the last video I hired from Blockbuster in 1997.
Like Blockbuster, the end is nigh for the scheme as it currently stands and a further extension looks unlikely, with that in mind the end date looks pretty certain to be 31st March 2021.
The question is, what does that mean for franchise businesses?
In short, it is a one off chance to do one of a few things that may make 2021 and beyond a very successful period. Let’s remember that the CBIL scheme allows for businesses to borrow up to 25% of current turnover. Loans up to £250k are exempt from needing a personal guarantee.
- This means that for any franchise planning to expand, or where a refurb is coming due then now is the time to finance those plans, don’t wait until these events fall due as the scheme may not be around and financing will come with more analysis and more personal risk
- Many franchises carry debt, whether that be early start turnkey costs, expansion or growth they are committed to. This borrowing is likely to be supported by a charge over property or a personal guarantee. This borrowing could be refinanced using CBILS and those supporting pieces of security removed
- For franchisors, they may have plans to help their franchisees expand. There is a unique opportunity to help their franchisees do this by using the CBIL scheme. Whilst the need for raising finance may not be immediate, there are benefits to using the CBIL scheme while it is around ahead of when the cash may be needed. Remember that there will be no payments to be made for 12 months so cashflow isn’t impacted
To help we have produced a short overview pdf document which can be shared and used as required.
The Franchise CBILS benefits
The message is simple, there is a limited time opportunity to use a great loan scheme. Let’s not forget the benefits;
- Loans up to £250k are exempt from requiring any form of personal guarantee
- The Government pay the first year interest and loan arrangement fees for you
- You can borrow up to 25% of 2019, or 2020, turnover whichever works best for you
- You can have as many CBILS loans as you want from as many lenders as you want, subject to remaining within the overall scheme limits
- You can borrow from any CBILS lender, not just your bank
Download the CBILS for franchise businesses guide here.
For any questions or queries with how this scheme could benefit your business then get in touch.
By Dave Farmer