Bounce Back Loan Update

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So it won’t be long before the first anniversary arrives when Bounce Back Loans were first made available to businesses.  So what do you need to consider:  if you need to borrow, if you’re not ready to repay, and if you want to defer making payments.

The Bounce Back Loan Scheme (BBLS) was set up and gives lenders a government-backed guarantee of 100% to offer loans of up to £50,000 to businesses across the UK that are losing revenue as a result of the COVID-19 outbreak.

Can I still get a Bounce Back Loan?

BBLS are still open for new applications until 31 March 2021 (extended from previous deadlines) so if you previously didn’t need to get funding and now find yourself in the position where you need to consider funding, then there is still time to apply.

How much can I borrow?

  • You can borrow from £2,000 – £50,000 this is capped at 25% of your turnover
  • Businesses that have borrowed less than their maximum limit may top up their existing loan – this came in on 9 November
  • No personal guarantees are required
  • Self-declaration is required from the business to confirm they meet the eligibility and it is a relatively straight forward process

Are you eligible?

  • UK company carrying on business on 1 March 2020
  • More than 50% of your income is from trading activity (so not available if more than your income was from employment income if you are a sole trader, or from investments in a business for example)
  • The loans will not be used for personal purposes but as an economic benefit for the business
  • You were not considered a business in difficulty on 31 December 2019
  • You are not in bankruptcy, debt restructuring proceedings or liquidation
  • Not an ineligible business: bank, building societies, insurance companies, the public sector including state funded schools, or an individual other than a sole trader or partner acting on behalf of a partnership.

How much are my repayments and when do I need to start making them?

Rishi recently announced earlier this month a new Pay as You Grow Option. Previously you would need to start making your repayments 12 months after taking out the loan.

The new Pay as You Grow Option means that you can now:

  • request an extension of your loan term to 10 years (originally 6 years), at the same fixed interest rate of 2.5%
  • reduce your monthly repayments for 6 months by paying interest only. You can do this three times during the term of your Bounce Back Loan.
  • you can take a repayment holiday for up to 6 months. This option is available once during the term of your Bounce Back Loan.

You can use one or all of these options above. This means that you could defer your initial payment to 18 months rather than having to pay on the 12 month anniversary of taking out the loan, or however this may fit with your cash flow needs. Remember this will increase the interest payable over the length of the term.

How do you access these new terms?

These options should be communicated to you 3 months before repayments commence by your lender.

What do I need to consider?

We strongly recommend that you put a cash flow forecast in place to help you identify where you may have potential pinch points, so that you can use these strategies as required, and to ensure that you can afford the repayments required.

Please reach out and speak to us if you are in need of funding or want to discuss your funding, cash flow forecasting options.

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