Repayments under the coronavirus business interruption loan scheme (CBILS) scheme should be paused and repayment terms should be extended to 10 years, a tax expert has claimed.
Richard Churchill, a partner at tax and advisory firm Blick Rothenberg, said borrowers under the CBILS scheme need the same options as those of the bounce back loan scheme (BBLS) if the government is serious about allowing businesses to pay as they grow.
CBILS offers loans ranging between £50,0001 to £5m, with 80 per cent of the loan’s value guaranteed by the government, while bounce back loans are 100 per cent government-backed facilities of up to £50,000.
Churchill said that interest-only payments for the CBILS scheme should be possible for up to six months, available three times during the period of the loan. He also suggested that repayments should immediately be paused for up to six months for those borrowers who need further assistance.
He said the current repayment profile under CBILS of paying back debts over five years results in high monthly payments, which will cause financial difficulty for many businesses.
Churchill added that the government needs to raise the maximum lending criteria of BBLS to £100,000 to ensure the companies that have borrowed under the scheme can “bounce back again”.
“The government needs to be more creative in its solutions and be equitable to both itself and business owners, which it is not at the moment,” he said.
“High levels of debt for businesses are unhealthy, stifling reinvestment which could limit diversification and development.
“A repayment profile for CBILS lending linked to profitably needs to be explored.”
Churchill said that whilst the chancellor’s Pay As You Grow initiative for BBLS will be welcomed by bounce back loan borrowers, it remains for many, “pay as you survive, as opposed to pay as you grow”.
“This…is not a great strategy on the part of the government,” he said.
“As the first payment dates for bounce back loans approach this will help businesses survive, but this does not create growth or more importantly address the same issues for larger business that borrowed under the CBILS scheme.”