Business Bounce Back Loan- How does it work?
Bounce Back Loan Scheme (BBLS)
It really is as the name suggests a scheme which has been launched for small businesses who are struggling to access coronavirus funding quickly enough.
This may be a vital lifeline for some businesses which have fallen through the net with the other coronavirus funding schemes.
So How does it work?
- You can borrow between £2,000 and £50,000. Though the amount is capped at 25% of your total turnover (usually for calendar year 2019, or new businesses can estimate).
- No interest will be charged and no repayments will need to be made in the first 12 months.
- After 12 months the interest rate will be 2.5% a year.
- It is 100% government guaranteed.
- You can repay the loan early without penalty
- The loans are set up to last for 6 years. As you can repay at any time it does give flexibility.
Who is eligible?
You can apply for a loan if your business:
- is based in the UK
- was established before 1st March 2020
- has been adversely impacted by coronavirus
If your business was classed as a business in difficulty on 31 December 2019 you’ll need to confirm that you’re complying with additional state aid restrictions.
Businesses from any sector can apply, except:
- banks, insurers and reinsurers (but not insurance brokers)
- public-sector bodies
- state-funded primary and secondary schools
Can I apply for the BBLS and the other Coronavirus Loan Schemes?
If you’ve already received a loan of up to £50,000 under any of the following:
- Coronavirus Business Interruption Loan Scheme (CBILS)
- Coronavirus Large Business Interruption Loan Scheme (CLBILS)
- COVID-19 Corporate Financing Facility
you can transfer it into the Bounce Back Loan scheme. You have until 4 November 2020 to arrange this with your lender.
You cannot apply for the BBLS if you are already claiming under any of the above, it is one or the other.
How to apply?
To apply, you’ll need to contact a participating bank directly and fill in a short online questionnaire. All banks are charging the same 2.5% annual interest. (after the first initial 12 months at 0%)
You will need some details to hand when filling in your application. You’ll need details of your annual turnover, account number, the amount you wish to borrow, a copy of your tax return and you also to confirm that your business has been adversely impacted by coronavirus.
The key thing to remember is that these loans are exactly that, they are loans and do need to be paid back. They are not grants like the furlough scheme or Self-Employment Income Support grants. All businesses that take out a bounce back loan are responsible for repaying any facility they may take out. No business will be required to make a repayment during the first 12 months of the loan, giving them time to get back on their feet.
As it is a loan it is likely to go on your business credit report.
It is vital to maintain cash-flow forecasts to ensure you know the cash position of your business now, and for at least the next 12 weeks. Ideally, we would recommend 12 months.
If you would like to discuss how to keep your business accounts up to date and reviewing cash positions please do get in touch.
