While there are many aspects of the Government’s response to the Covid-19 pandemic that have aroused peoples’ emotions, good and bad, there is general agreement that the financial help package offered by Rishi Sunak has been the saviour of many a business to date.
The two main packages are the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS). The scheme that you access will depend on the size of your company and the size of the loan.
What is common to both schemes is that the borrower i.e. your company, is fully liable for the debt. The Government will help by covering the first year’s interest and fees on the loan but it is not guaranteeing the capital repayment – that remains firmly with the business.
So, having accessed the help available, what should companies be doing to cover this extra debt?
The financial packages set up by HM Government are in response to a global pandemic – a worldwide crisis. What if that crisis becomes much more local and involves the death of a Director (shareholding or otherwise) or a key employee being diagnosed with a serious medical condition? The effect on the business could be even more catastrophic than Covid-19 so, surely, any company that has obtained a loan should be considering how to protect themselves in the event of an internal crisis.
With life cover available at historically low levels, the cost of covering a CBILS or BBLS loan will be minimal by comparison to the loan itself. For example, £300,000 of cover for 6 years (the maximum term of one of these loans) for a non-smoking 50 year old would be less than £30 per month*. For a 40 year old, it would be less than £15 per month*.
Adding in Critical Illness cover would increase monthly costs to around £190 per month* and £85 per month respectively*.
(*Premiums quoted are unisex and assume acceptance by an insurer on normal terms. This will usually apply to a person who is in good health, has no adverse personal or family history, and does not follow a hazardous occupation or pastime)
If you are one of the companies who has sought Government help to support your business, it must be the logical step to ensure you are also protecting the business for the extra debt by putting protection in place on the Directors and/or key staff.
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