UWR 086 – Should I Get a Loan During Coronavirus?

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Welcome to Uncover Wealth Radio Episode 86 – In this episode, we will be talking about Getting a Loan During Coronavirus

Today, Annette Ferguson, who is the host of Uncover Wealth Radio and a pro in helping entrepreneurs take home more money from their business for them and their family to enjoy, is here to tell you all about money, business wealth and creating financial freedom

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Welcome to Uncover Wealth Radio episode 86 where today I’m speaking about should we get a loan during coronavirus. Let’s dive in.

Should you get a loan to see your business through coronavirus? Whether or not you should get a loan at this point in time depends on a few factors, and there’s a lot of things to consider here. First of all, in the UK, it is the coronavirus business interruption loan scheme that you may want to be looking at in order to get a loan to see you through. This is a scheme that was announced by the government, and the government pay the interest on this loan for the first 12-month period.

Now, it’s important to remember that the capital is still repayable. However, the loan interest is taken care of by the government. There are currently at the time of recording, which is early April, we are on the 3rd of April, there are currently 14 banks that are approved to provide this loan at this point in time. However, the chancellor has said that more banks are planned to be brought on as well.

The initial advice if you are thinking about getting this loan is to apply through your current bank if your current bank offers this. If it does not, then, of course, you would need to look to an alternative bank. But the question is, should you actually be taking on debt in your business at this point in time?

Well, remember that coronavirus, although it’s hitting companies incredibly hard right now is a short-term thing. A loan is more long term. Please, do remember that when you take on a loan, you will have repayments potentially quite far into the future to pay back that loan. You need to understand what your business’s cash position is likely to be in the future in order to understand whether it is a viable option for you to take a loan out or not.

Now, think about whether before coronavirus hit, would you have taken a loan to fuel growth? Would the loan have been a good idea? Would you have been able to afford loan repayments prior to this happening? If the answer is no, you would not have been able to afford loan repayments prior to this happening, then, you really need to think carefully about whether or not you can afford loan repayments afterwards once we are back up and running as a country, once you have people buying from you again. If you couldn’t afford one before, why would the situation be any different afterwards? It’s a really important consideration to think about.

Now, things may have changed in your business. You may have got leaner in other expenses, and that’s the reason that you would be able to afford a loan afterwards, but it’s really important to remember that you need to be able to afford it. You need to assess your business’s own affordability on this loan. It’s not a magic bullet, and it’s not a quick fix in a business. It is a loan that you will be taking out, so you will have to make the repayments upon it.

Now, from what we’ve heard from clients having conversations with their banks, it seems that many banks are amenable with this loan to have a payment holiday for the first few months at least. That will help with the capital repayments that you will have to make on the loan. If you are speaking to your bank about this, that’s an important thing to be asking if you decide to go down the route of getting a loan.

There’s also another important point whereby up until now, many of the banks have been requiring director’s guarantees on these loans. However, the chancellor has come out and said that that should not be required for loans up to 250,000 pounds. You should be able to get that without a director’s guarantee. Again, if your bank has been urging you to a director’s guarantee, that is something to be raising with them.

We’ve also anecdotally heard from a number of people who are trying to be pushed into other banking products. Again, stand your ground on that, and make sure that you’re clear that this is the type of loan that you want if you want this type of loan at all. The big thing to understand is the affordability. Should you be taking a loan to get your business through this time that you may currently think, “Well, there’s no other option here. I still have costs to pay that I can’t do anything with?” Well, I would urge you to assess those costs really deeply and also speak to the people you are due to pay.

Make sure that you’re really clear that your costs are as lean as they can be. Make sure that there’s nothing that can be done with any of your vendors or suppliers to reduce those costs down a little more to hopefully mean that you may not have to take out a loan to survive this period just to get by because that is what we don’t want. We don’t want businesses having been forced into taking loans so that they can survive this period but then being saddled with a loan afterwards where the repayments are just not going to be doable even once the revenue comes back up. You need to be really, really careful that that is going to work for you. Okay.

My name is Annette Ferguson. I’m CEO of Annette & Co, a UK-based accounting firm. I’m a chartered accountant, certified Profit First Professional income strategist and profit mentor. I want to support you both during this crisis and beyond as well with the running of your business with the financial health of your business. It’s so incredibly important to do as much as we possibly can to maintain the financial health of our business during this time as well.

If you’re wondering about how to assess those costs in your business at the moment and what you might be able to do on costs, I do have a video called Money Leaks. You’ll be able to find that on my channel. You can check that out, and I highly urge you to do the exercise in that video. I think that you will find it incredibly useful, particularly just now, but in all honesty at any point in time as well. It’s always great to ensure that our businesses are lean in our costs, and there is no money leaking out of our business.

Thank you so much for tuning in today. If you enjoy what I share in this podcast, I would love if you want to subscribe and even more so if you want to leave a review on iTunes so that other people can benefit from the podcast and find it more easily as well. I would also love if you want to take a screenshot of this episode as you’re listening to it on your device, share it out on social media and make sure that you tag me. I am annette_fergs on both Instagram and Twitter, so make sure you tag me so that I can come and give you a follow, give you some lights and some love in there as well. Thank you so much for tuning in.

About the Author

Annette Ferguson 

Owner of Annette & Co. - Chartered Accountants & Certified Profit First Professionals. Helping online service-based entrepreneurs find clarity in their numbers, increase wealth and have more money in their pockets.