As part of plans to support small businesses affected by the Coronavirus, the Government has unveiled a new Bounce Back Loan Scheme (BBLS), which will enable companies to access finance to mitigate the effects of the lockdown on their cashflow. In this blog post, Manchester small business accountants, MCC, explain how the scheme works and whether your business is eligible.
The BBLS is only available through lenders accredited by the British Business Bank. The full list, which includes most major UK banks, is available by clicking here; it is hoped that a wider selection will be available in the near future. If a small business opts for one of these loans, they will be able to lend between £2,000 and 25% of turnover, though this has been capped at £50,000. If a business is turned down by its first choice of lender, it is free to seek support from others.
The loan scheme comes with a number of advantages. The repayment term is six years, but repayments can be made at any time within this period. There will be no early repayment fees and there is no obligation to make repayments for the first 12 months. The interest rate has been set at 2.5%, though businesses will not have to pay any interest or associated fees for the first 12 months, as these costs will be covered by a Government BIP (Business Interruption Payment). Business owners should also take heart from the Government’s declaration that lenders will not be able to take personal assets, such as family property, as security.
Small businesses had reported that they were struggling to access other loan schemes announced earlier in the lockdown, because lenders feared that they would never be repaid. However, the BBLS is 100% Government backed, which should encourage banks to lend. Businesses should be aware, though, that they still remain liable for the debt.
In order to be eligible for the loans, businesses must meet a number of set criteria. A company must first demonstrate that the Coronavirus has had a considerable impact on business and that it was not experiencing financial difficulties prior to 31st December 2019 or is filing for bankruptcy when it applies for loan. 50% of its income must come from its trading activities and it must have been in business since before 1st March 2020. Finally, it should not be receiving Government funding from other schemes, namely:
- Covid Corporate Financing Facility Scheme
- Coronavirus Business Interruption Loan Scheme
- Coronavirus Large Business Interruption Loan Scheme
Businesses in the following sectors are not eligible for the loans, even if they meet the criteria listed above:
- Insurance companies
- Public-sector organisations
- Primary and secondary school which receive state funding
- Credit institutions
MCC Accountants: Support
The loan scheme has proved hugely popular, with 100,000 applications being made within 24 hours of its launch. Initially, it will be open until 4th November 2020. If you would like more information or need assistance applying for the Bounce Back loans, please contact the team at Manchester small business accountants, MCC. We also have a number of business support packages designed to help your business at this difficult time.