After the Prime Ministers’ announcement on Monday, many small businesses are beginning to re-open and consider moving staff off furlough. There is still, however, the lingering pressure of reduced revenue and pressing overheads for many UK businesses.
The Bounce Back Loan scheme is the government’s answer to this pressure. From first-hand experience across our business and as told by many of my associates, the loan has a simple application process and no interest for the first 12 months.
Who is eligible for the scheme?
The new financial scheme is designed for small and medium-sized business based anywhere in the UK and established before 1st march 2020.
Who isn’t eligible?
If you are already receiving funding or fall into one of the following sectors, you are not eligible:
- Banks, insurers and reinsurers (but not insurance brokers)
- Public-sector bodies
- State-funded primary and secondary schools
Businesses who are already claiming under any of the following schemes can, however, transfer their loan to a Bounce Back Loan so as to benefit from the low repayment rates.
- Coronavirus Business Interruption Loan Scheme (CBILS)
- Coronavirus Large Business Interruption Loan Scheme (CLBILS)
- COVID-19 Corporate Financing Facility
How much is available via the Bounce Back Loan?
A minimum of £2,000 is available per business. Businesses can borrow up to 25% of their annual turnover up to £50,000.
When does the loan need to be repaid by?
If repaid within 12 months, there is no fee or interest. After 12 months, the interest rate is 2.5% a year.
The loan is available for up to 6 years.
How to apply?
- Find a lender from the official list. There are eleven to choose from.
- Complete their application form. From our experience, the application is a simple one-page form asking for details such as turnover and the amount you wish to borrow. No need to provide pages of technical financial details.
- Receive funds. We’ve seen this happen in just two days.
If you aren’t accepted, you are allowed to reapply with a different lender.
How could you use the loan?
- Pay off existing debts
- Forecast and estimate upcoming overheads and required costs
- Invest in re-engaging known customers
- Invest in channels you are still able to trade through, such as mail order or online
(note: we are not a regulated financial advisory body, and the following is just an observation based on our understanding. Please seek professional help if needed)