On 27 April the Chancellor announced a new Bounce Back Loan scheme, which was launched on 4 May 2020. The deadline to apply for this scheme has been extended until the end of March 2021.
This fast-track finance scheme is aimed as small and medium-sized businesses and will provide loans up to the value of 25 per cent of a business’s turnover, capped at £50,000. The Government will guarantee 100% of the loan and there won’t be any fees, interest or repayments to pay for the first 12 months. Loan terms will be up to 10 years and the Government has agreed with lenders that a flat rate of 2.5% interest will be charged on the loans.
Under the Pay as You Grow scheme subsequently announced by the Government, businesses have the following options:
- Extending the loan term from six years to ten years
- Choose to make no repayments for up to 18 months after the loan was originally received (the repayment free period was originally 12 months)
- Make interest-only payments for six months. This option can be used up to three times throughout the loan term
Banks will be in touch with borrowers regarding their repayment arrangements directly.
Businesses are eligible if they are based in the UK, have been negatively affected by coronavirus and weren’t an ‘undertaking in difficulty’ on 31 December 2019. Some businesses are specifically excluded from this scheme, such as banks, insurers and further-education establishments if they are grant funded.
Applications can be made online via accredited lenders through a short and simple form and the cash is expected to be available within days of an application being made. The loans will not be subject to forward-looking business viability tests or complex eligibility criteria.
Businesses cannot apply for this loan scheme if they have already claimed under the Coronavirus Business Interruption Loan Scheme (CBILS.) However, if a business has received a loan of up to £50,000 under CBILS and would like to transfer it to the Bounce Back Loan Scheme, then this can be arranged with the lender until 4 November 2020.
For those who have borrowed less than their maximum (i.e. less than 25% of turnover) there is now the ability to top-up an existing Bounce Back Loan. This can be done from the week commencing 7 November and businesses can make use of this option once. The maximum amount that can be borrowed continues to be up to £50,000.
If you have any specific queries regarding this scheme then please get in touch with your usual Dodd & Co contact who will be happy to help.
