After the Chancellors announcement of the new Bounce Back Loan scheme, there are some details below which hopefully clarify whether you would benefit from accessing the funding.
What is a Bounce Back Loan
The loans are designed to be fast access to cash to help those smallest businesses keep going during the pandemic.
The idea is that you can borrow between £2,000 and £50,000 via an easy online, standard, application form and that the cash should be advanced within days rather than the usual weeks.
Eligibility
To be eligible for the loan your business must;
- Be based in the UK
- Have been negatively effected by COVID-19
- Was not an ‘undertaking in difficulty’ on 31 December 2019
There are some non-eligible businesses as well which are;
- Banks, insurers and reinsurers (this doesn’t include insurance brokers though)
- Public sector bodies
- State funded primary and secondary schools
Just to clarify, the ‘undertaking in difficulty’ point refers to an EU directive of which you can find the exact wording here; https://ec.europa.eu/competition/state_aid/legislation/rescue_resctructuring_communication_en.pdf
However, most simply it means those of you that have Limited Companies with a negative reserve balance at 31 December won’t be eligible for the loan.
Who can apply
It seems that anyone with a business, sole traders, limited companies and partnerships can apply. Although it’s not yet clear whether you will need a business bank account for this so that may have an impact on some of the sole traders.
Costs
The loan is set to be interest free for the first 12 months and there are also no repayments required for the first 12 months. The loan terms can be up to six years.
The interest rates on these loans also looks to be set at 2.5% across the board.
When can you apply
The loan scheme opens on Monday 04 May, the government are saying that it will be available from all ‘accredited’ lenders, however the general consensus at the moment seems to be that the high street banks will be the first to make it available to apply. Barclays for example already have their website up and running, although obviously you can’t yet apply.
CBILS and Bounce Back
If you’ve already taken a Coronavirus Business Interruption Loan then you can’t also apply for a Bounce Back loan, however if you’ve borrowed up to £50k then you can apply to convert the CBIL in to a Bounce Back at the same terms. These conversions will be available for 6 months up to the 04 November 2020.
Hopefully this is good news for some of you struggling with cash flow and may help out those of you who have fallen through the cracks with the schemes already announced.
If you have any queries or would like to discuss anything included in the above, please don’t hesitate to get in touch.
Laura