Can I take out a second CBILS loan?

Can I take out a second CBILS loan?

Guest blog post from Fluidly, our cashflow and funding partner.

Most business owners don’t realise, but the government’s flagship coronavirus loan scheme actually allows you to take out more than one loan.

With the deadline to apply for government CBILS loans extended once more, some business owners are making the most of the extension to do just that.

How does having a second CBILS work?

The key thing to remember if you’re looking to take out another CBILS loan is that you can’t borrow more than 25% of your annual turnover. For instance, if your first loan was worth 20% of what your business turns over in a year, the value of your second loan can’t be over 5%.

We’re generally seeing businesses take out a second CBILS in order to borrow more. This might be to boost cashflow during the third lockdown, invest in stock or equipment or simply cover a gap in revenue.

But you could also use a second CBILS loan to refinance existing CBILS funding, a bit like a balance transfer card. Here businesses take out a second CBILS loan purely to shift the existing debt onto that.

In this “balance transfer” scenario, you can delay repayments and interest by another 12 months. Once you pay off the old loan with the new loan, you start afresh and no longer have any business with the first lender you borrowed from.

Theoretically, if you took out a CBILS loan in March 2020 and refinanced with it a new one of the same amount in March 2021, you could have a full 24 months of no repayments or interest.

What would an example look like?

Let’s say you run a shop called Wendy’s Wines. During the first lockdown your store experienced a significant slump in sales, so you decide to take out a £50k CBILS loan to tide the business over and build an online shop.

When lockdown three hits you decide it might be worth exploring your options again. Rather than going to your bank, this time you go to an alternative lender like iwoca or Funding Circle.

Since Wendy’s Wines turns over £400k and your first loan of £50k is equal to 12.5% of the business’ annual turnover, you’re entitled to borrow up to another £50k with CBILS. A second CBILS loan of £50k would take your borrowing to a total of £100k, or 25% of your turnover, which is the maximum you can borrow via the scheme.

At this point you have a choice:

Option A: You take out an additional loan of up to £50k and run both facilities at the same time. The interest and repayments for the second loan start a year from now, but the terms for your first loan remain unchanged.

Option B: You refinance the £50k loan from your bank with a fresh £50k CBILS loan from an alternative lender, where you don’t get any additional funds, but get a new 12 month interest and repayment free period.

If you need to invest in more stock or spend more money on marketing, you might go for option A. If you don’t think you’re going to be able to pay back the first loan for a while, you might be more interested in option B.

How do I apply for a second CBILS?

It’s simple – you can apply for a second CBILS loan via Fluidly here. With Fluidly you can review options across the entire market, rather going directly to a single lender.

We help you get offers quickly and a loan in days. Our team of funding specialists provides free advice too, so you know you’re getting the best deal.