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As part of the Coronavirus Support Schemes, the Government introduced the Bounce Back Loan to support Small Businesses through this most difficult of times. Since the initial announcement there has been a few further improvements made here, so we wanted to make you aware of these, especially as this scheme is coming to an end by 31 March 2021 (unless there are subsequent extensions).
Recent changes have meant there was longer to apply, you can ‘top up’ if you didn’t borrow the full amount initially and pay the loan back now over the longer period.
Background
Small business were able to borrow up to £50,000 (capped at 25% of turnover) of 100% state-backed loans, with no interest charged or repayment for the first 12 months and an interest rate of 2.5% thereafter. Since the launch in May 2020 over a million loans have been issued. For more details of who you can borrow and for more information about the scheme please go to the British Business Bank Website.
Some of the key highlights include:
- Capped at 25% of turnover, you can borrow between £2,000 and £50,000. This is usually based on 2019 numbers, although new business can use forecasts;
- There are no interest or repayments in the first 12 months. After this period, interest is chargeable at 2.5%;
- You can repay it early without penalty. Several of our clients have taken it out for this reason, just in case, but will look to repay it before interest is payable, if they don’t need it;
- These loans are unsecured and credit ratings will not affect eligibility. The loan will go on your business credit report, but not a personal one;
- You can apply for the bounce back loan through your bank and there are many banks still offering them; and
- They won’t affect your eligibility for other Government Support, although you cannot take out a Bounce Back, Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS), you have to choose just one of these.
‘New’ News
Since it was first announced the following improvements have been made:
- The initial deadline of 30 November 2020 has been extended to 31 March 2021 (unless it is extended again). If you haven’t already applied and this might be something helpful for your business, act soon;
- You can ‘top up’ your bounce back loan if you didn’t initially borrow the full amount you were entitled to;
- Originally the loan term was set up to last for six years. This has now been extended to 10 years, which can almost half monthly repayments. However, it can be repaid early at any time without paying a penalty;
- You can now ask for the period before you start paying this back to be extended from 12 months to 18. However, interest will still kick in from 12 months; and
- You can move the interest-only payments temporarily up to three times, with interest-only payment lasting up to six months.
*Budget 2021 Update
In the Budget announcement on 3 March 2021, Rishi Sunak confirmed that the Bounce Back Loan will be closing on 31 March 2021. However, he also confirmed that a new state-backed ‘recovery loan’ will be available for all viable businesses hit by the pandemic, for legitimate business purposes. Full details will follow, but we understand currently that:
- Loans and overdrafts of between £25,000 and £10m;
- Asset/invoice finance from £1,000 to £10m;
- Unsecured finance of up to £250,000;
- You’ll be able to apply, even if you have a bounce back loan.
- Terms will be up to six years for loans and asset finance, and up to three years for overdrafts and invoice finance.
We don’t know the interest rate, will there be a credit check, will they be available for sole traders and limited companies etc. However, we will update you as soon as we hear anything further.
Black and White Accounting
At this most difficult of times, we are doing everything we can to help and support as many people as possible, for example by keeping them up to date with all the latest news and support schemes as we have done here. Why not sign up to our newsletter using the link below, or follow us across Facebook, Instagram, LinkedIn, Twitter and YouTube to be kept up to date too?
If there is anything else we can do to help at this point, please get in touch by contacting Black and White Chartered Certified Accountants, populate the “Got a Question” form on the right, or call us on 0800 140 4644.
