The current COVID-19 outbreak and the subsequent lockdown has caused a lot of businesses to lose revenue and as such have seen their cash flow disrupted, which in turn has led to staff being placed on furlough or worse case made redundant.
To help these businesses, the Bounce Back Loan Scheme (BBLS) has been implemented where businesses can benefit from £50,000 or less in finance. The lender can offer a six-year term loan from £2,000 up to 25% of a business' turnover. The maximum loan amount is £50,000. Below is a quick guide on what you need to know to be eligible for this scheme.
To be eligible for the Bounce Back Loan Scheme you must self-declare to the lender that your business has been impacted because of the coronavirus (COVID-19) and was not in difficulty on December 31st, 2019.
Also, that your business is engaged in trading or commercial activity in the UK and was established by March 1st, 2020, and most importantly you will use the loan money as working capital to reinvest into the business.
In terms of repayments, you will be 100% liable for repaying the loan and any interest. The government will cover interest payable to the lender for the first 12 months. You will then need to make full repayments on the loan and any interest charged up to the end of the six-year term, as per your arrangement with the lender.
The government has set the interest rate for this facility at 2.5% per annum. Lenders are not permitted to charge any fees, and loans under this scheme are available over a fixed six-year term.
Businesses can apply for between £2,000 up to 25% of their turnover. The maximum loan available under the scheme is £50,000.
The government has said they will cover the interest repayments for the first 12 months. Businesses are not required to make repayments for the first 12 months but will still have to repay the loan and any interest after 12 months.
Repaying any loan early is always advised, so if you are able to make early repayments then this is welcomed at any stage, but make sure you can afford to do so and that you don’t put yourself in further financial difficulty.