CBI loans - fees and rates after the 0% period

[d000hg]

Do we know anything about this? IIRC these loans are 0% for 12 months (from when you take the loan I assume not the scheme start date) but has any information been given what happens afterwards? I know we can expect an attractive rate but if we don't know that already, when would it likely be decided/disclosed?

[northernladuk]

If I'm thinking about the right scheme I didn't think it was 0%. I thought the scheme covered payments for 12 months so I'd read in to that you'd revert back to the standard rate of whatever provider you took the loan from.

Looking at the supporting documentation required I can't believe a contractor company like ours will come close to eligibility. It talks about cash flow forecasts, business plans etc... none of that we will have and even if we made something up it doesn't look very good to lend against.

[d000hg]

You're right, it's 0% to the borrower but someone is paying for it... the government.
However if it reverts to standard rates that is not much good at all. I had thought it would remain attractive otherwise companies will just be going bankrupt a bit later due to loan servicing. This is precisely why I wondered if such details have been formalised yet because it affects whether a company should take such a loan, or do everything they possibly can to avoid it.

Why don't you have a business plan and cashflow forecast NLUK? Doesn't sound like you're running a proper business to me
Seriously though these are easy to do - and isn't one of the key points that lenders are supposed to issue the loans because the government is backing them, without being too concerned about the normal process?

I don't know if contractors would see much benefit though. Unless it's a free loan and you might as well to protect your war-chest.

[WTFH]

You're right, it's 0% to the borrower but someone is paying for it... the government.
However if it reverts to standard rates that is not much good at all. I had thought it would remain attractive otherwise companies will just be going bankrupt a bit later due to loan servicing.

The government is paying for it. They are the guarantor for it (i.e. if you default, they will pay it).
When it reverts back, you will still be liable for it + the new interest.

It's not free money, it's good marketing for a loan scheme that helps support a couple of banks.

[northernladuk]

You're right, it's 0% to the borrower but someone is paying for it... the government.
However if it reverts to standard rates that is not much good at all. I had thought it would remain attractive otherwise companies will just be going bankrupt a bit later due to loan servicing. This is precisely why I wondered if such details have been formalised yet because it affects whether a company should take such a loan, or do everything they possibly can to avoid it.

It could be enough to keep many small business afloat until cash flow resumes. It's not there to keep them BAU. It's gonna be tough after all this for everyone so servicing a loan rather than going bust won't be the worst thing.

Why don't you have a business plan and cashflow forecast NLUK? Doesn't sound like you're running a proper business to me

I do but a business plan to invoice as much as possible and cash flow is variable dependant on invoicing isn't much of a business plan.

Seriously though these are easy to do - and isn't one of the key points that lenders are supposed to issue the loans because the government is backing them, without being too concerned about the normal process?

Pardon? They are going to throw money away without being concerned about normal process. Are you having a laugh. Where did it say that? It's a loan to help viable companies. No way are they not going to be concerned about normal process. Gov backed or not they aren't going to throw money at failed business, scams and outright fraudsters.

I don't know why you think many of these are even going to get given to be honest. History has show that everytime some kind of bailout like this happens the lenders rarely step up and pass it on. I'll bet the number of people that get granted one of these loans will be very low and create a scandal that will hit the papers.

I don't know if contractors would see much benefit though. Unless it's a free loan and you might as well to protect your war-chest.

There could be that but it could also be creating a false buffer that potentially puts you in an even bigger world of problems down the line. I don't think any contractors will get it anyway so wouldn't be too worried about anything beyond the application process at this point.

[d000hg]

The government is actively pushing lenders to lend and is setting this up as I understand it, so that the lenders have government backing i.e. if you don't pay it back, the government guarantees to.
the government has explicitly said that this is the banks payback for the public bailout of 08...
You have to provide data BUT lenders are supposed to be trying to find ways to accept rather than reject.

[WTFH]

the government has explicitly said that this is the banks payback for the public bailout of 08...

Exactly. In 2008 we bailed out the bank owners, now we're giving them more money, but the marketing spin is that they are losing money by doing it!

[d000hg]

Exactly. In 2008 we bailed out the bank owners, now we're giving them more money, but the marketing spin is that they are losing money by doing it!

I've not heard anyone claim the banks are losing money by doing it. It's quite clearly worded that El Gov is paying the fees.

But I do wonder if the banks are being pressured to offer a low base rate, does anyone actually know if the new loans ARE charging the government the same as their standard business loans, or has the government negotiated/stipulated a preferential deal since the amounts are so large and said "you WILL take this deal"?