Bounce Back Loans
Since the scheme launched in May 2020 (just 3 months ago), more than 860,000 bounce back loans have been issued. This means that thousands of small businesses who are struggling due to Coronavirus have applied for and received financial help; help of which will hopefully get them through this turbulent time. So what are bounce back loans? Here is what you need to know about them including a list of questions to help you decide whether you should apply for one.
Business Bounce Back Loans
While there has been a lot of financial support being dished out due to the impact of the Coronavirus, there are small businesses that can’t access this funding quickly enough; self-employed people who don’t qualify for the Self-Employment Income Support Scheme, and limited company directors who have fallen through the cracks. For these businesses and individuals, the ones who aren’t covered by other schemes, bounce back loans are a saving grace.
So what are bounce banks loans?
Bounce back loans are 100% government-backed loans which include the following:
- Loan amount from £2000-£50000, or 25% of your annual turnover (whichever is lower)
- No interest charged in the first 12 months (the Government will cover the first year)
- No repayments needed in the first 12 months
- After 12 months, all banks charge a fixed 2.5% interest rate/year
- 6-year loan with no early repayment charges
- Straightforward application and quick access to funds
Obviously, your business will always remain responsible for the repayment of the whole debt amount, but bounce back loans will provide you with significant support over the next 12 months.
Should I apply?
To help you decide whether you should apply for a bounce back loan, here are some questions for you to consider. If your answer is yes to a number of the following questions, then you are eligible to receive support:
- Am I a UK-based business that has been impacted by Covid-19?
- Was my business established before 1 March 2020?
- Is this the only support that I am applying for (with the exception of personal support)?
- Do I need financial help in addition to the self-employment income support grant and universal credit?
- Do I need to repay existing finance, i.e. lenders?
- Do I need help to pay investments or working capital for the business – including bills, running costs and wages?
- Do I need capital immediately (within 24 hours)?
Things to note
If you would like to apply for a bounce back loan, all you must do is contact a bank directly and fill in a short online application. You will need details of your annual turnover, your account number, the amount you wish to borrow, a copy of your tax return, and proof that your business has been negatively impacted by Covid-19.
In terms of repayments, there are no interest or repayments in the first year but after those 12 months, you will need to make 60 repayments of the amount borrowed. Unlike a personal loan, however, you will not have fixed payments. Each month, you will repay 1/60th of the capital plus the interest that has accumulated that month. This means that the amount you owe will decrease over time and in turn, your repayment amount will decrease too.