If you are a small business struggling due to the coronavirus, you are now able to apply for a new 100% government-backed loan worth up to £50,000, with no interest charged or repayments needed in the first 12 months. Let’s take a closer look…
What are bounce back loans?
The Bounce Back Loan Scheme (BBLS) has been launched due to fears that small businesses cannot access coronavirus funding quickly enough. Bounce back loans are delivered by lenders accredited by the British Business Bank and target small businesses in all sectors. They are separate from the Coronavirus Business Interruption Loan Scheme (CBILS) which is for larger amounts, but not 100% government-guaranteed. Don’t panic if you have already applied for the CBILS scheme as you can apply to have it switched to the bounce back scheme if you prefer.
How much can I borrow and how is it repaid?
The bounce back scheme provides loans from £2,000 up to 25% of the business’ turnover with a maximum loan available of £50,000. The government has set the interest rate for this loan at 2.5% per annum and the repayment is fixed at six years. No interest will be charged, or repayments needed in the first 12 months. So, to clarify, that’s a year interest-free and the rest at 2.5%. You can repay the loan early without paying an early repayment penalty. Or with some banks you can part-repay or overpay. Obviously, the sooner you repay once interest is charged, the smaller the overall cost so it is worth doing if you can.
Businesses (the borrower) always remain 100% liable for the debt.
The loans are unsecured but, this is actually good news for you and your business. ‘Secured’ loans include mortgages, where your home can be taken if you do not repay. With bounce back loans you do not provide the security (the government does) so it is far more difficult for your assets to be taken if you cannot repay.
Is my business eligible?
- Your business must have been established before 1 March 2020. It must also still be trading as a going concern i.e. you have the resources needed to continue operating indefinitely until you provide evidence to the contrary at the point of application (temporary closure due to Conronavirus does not matter). Any issues at the point of application must be due to Coronavirus.
- Your business must be able to confirm that it is not currently using a government-backed Coronavirus loan scheme (unless using BBLS to refinance a whole facility).
- Your business must be able to confirm it is not in bankruptcy, liquidation or undergoing debt restructuring.
Will credit ratings effect my eligibility?
Credit ratings (business or personal) will not impact your eligibility – so most small businesses should be able to get a bounce back loan. The loan will likely go on your business credit report, but not on your personal one.
What banks are offering bounce back loans?
A full list of accredited lenders currently offering the bounce back loan scheme can be found on the British Business Bank website. They are continually adding accrediting lenders to the page as soon as new lenders are confirmed, so monitor the page for updates.
How do I apply?
To apply for a bounce back loan, you will need to contact a bank directly and fill in a short online application. All banks charge the same 2.5% annual interest (after the first 12 months at 0%).
When filling in your application, you will need the following details to hand:
- Details of your annual turnover
- Your account number
- The amount you want to borrow
- A copy of your tax return
- Confirmation that your business has been adversely impacted by Coronavirus.
The Scheme is intended to be a temporary response to the unprecedented challenges to businesses as a result of coronavirus (COVID-19). The Scheme will initially open until 4 November 2020, with the government retaining the right to extend this.
Help and support
Detailed FAQs concerning the bounce back loan scheme can be found on the British Business Bank website. Alternatively, the team at Bells Accountants are at hand for your business during this period of uncertainty and we are always happy to guide and support you.