Could you benefit from The Bounce Back Loan Scheme?

As part of their coronavirus support strategy, the government has introduced bounce-back loans for small and medium-sized businesses. Formally known as The Bounce Back Loan Scheme (BBLS), our limited company clients could be able to borrow between £2,000 and up to 25% of their turnover. The maximum amount available as part of the BBLS is £50,000. However, should you require more, additional government support may be available through other avenues.

This article will provide you with an overview of the BBLS, help you understand if you’re eligible and provide information on how to make an application.

What is The Bounce Back Loan Scheme?

The Bounce Back Loan Scheme (BBLS) has been introduced to help small (including personal service companies) and medium-sized businesses get quick access to cash. The government is guaranteeing 100% of the loan, and there is no interest to pay in the first 12 months (2.5% thereafter).

Taking advantage of the BBLS may be the best solution to protect your business and livelihood through the uncertain times ahead. However, it is worth remembering that limited company Directors can claim through the Coronavirus Job Retention Scheme (CJRS), but it may not be the most suitable option for all. More information is available in our blog: ‘How to Claim Using the Coronavirus Job Retention Scheme’.

The BBLS – What you Need to Know

Taking out a loan of any value is a big commitment, and not a decision that should be taken lightly. However, the government has done what it can to make the BBLS as attractive as possible, and there are plenty of reasons the BBLS is far more feasible for small and medium-sized business owners compared to a traditional bank loan.

There are a lot of essential pieces of information that you need to know about the BBLS and we have summarised them below:

• The amount you can borrow – Small and medium-sized businesses can borrow from £2,000, up to 25% of their turnover. The maximum available as part of the BBLS is £50,000.
• Loan period – The term of the loan is six years. However, you can pay it back earlier if you wish and there will be no early repayment charges.
• Interest rates– The first 12 months of the loan period is interest-free. From then onwards, interest will be 2.5%.
• Set up costs – Completing the application process is free and there are no hidden costs.
• Guarantees – The government is offering all lenders a guarantee against these loans. However, you will still be responsible for paying back 100% of the loan and could face debt recovery procedures should you default on any payments. Please speak to your lender for more information – before committing to a loan as part of the BBLS.
• If you are turned down by a lender – You are free to apply for a loan via the BBLS with other lenders as well.

More support is available for small and medium-sized business owners, including the Coronavirus Business Interuption Loan Scheme (CBILS). For more information, please visit the official government website and the official British Business Bank website.

Who is eligible for a loan as part of the BBLS?

You can apply for a loan if:

• Your business is based in the United Kingdom
• Your business was established before 1^st March 2020
• Your business has been adversely affected as a result of the COVID-19 pandemic

You are not able to apply for a loan as part of the BBLS if:

• Your business is a bank, insurer or reinsurer (but insurance brokers can apply)
• Your business is a public sector body
• Your business is a state-funded primary or secondary school
• You are already claiming as part of:
  • Coronavirus Business Interruption Loan Scheme (CBILS) – click here for more information.
  • Coronavirus Large Business Interruption Loan Scheme (CLBILS) – click here for more information.
  • COVID-19 Corporate Financing Facility – click here for more information.

The government states that if “you’ve already received a loan of up to £50,000 under one of these schemes you can transfer it into the Bounce Back Loan scheme. You have until 4 November 2020 to arrange this with your lender.”

What could a loan help with?

Only you can decide whether or not you want to apply for a loan as part of the BBLS. However, it may be the most suitable support package to help you with the following:

• Consolidating your outstanding invoices and debt – Settle outstanding invoices and getting your business finances up to date.
• Investing up to £50,000 in the future growth of your business.
• Training or equipment that can help you flourish once things start to return to normal.
• Diversifying your business and developing new capabilities to cater to a changing marketplace.
• Supporting yourself with salary.

Applying for a Loan via the BBLS

To apply for a loan as part of the BBLS, you must approach one of the participating lenders. Thankfully, a majority of the leading banks within the UK are offering this loan, including Barclays, NatWest, Lloyds, Santander, RBS, TSB, and more. Please click here to see a full list of accredited lenders and partners.

Many lenders claim that it is easy for business owners to apply for a loan as part of the BBLS, but the process will vary amongst providers. If you decide you want to make an application, please feel free to comment on this blog and share your experience.

This article has been written to provide useful information for Churchill Knight & Associates Ltd clients. While every care has been put into this article to ensure information is accurate at the time of publishing, we must advise you to speak with your lender and run through everything stated in this article for clarification. You should not rely on this information solely to decide whether or not to apply for a business loan as part of the BBLS. We will not be held liable for any accidentally false, inaccurate or incomplete information on our blog.