Yesterday the government announced that small firms are to get access to 100% taxpayer-backed loans of up to a maximum of £50,000 or 25% of turnover under a new loan scheme called Bounce Back.
Who is this scheme for?
This scheme is open to a business
- based in the UK
- which has been negatively affected by coronavirus
- was not an ‘undertaking in difficulty’ on 31 December 2019
There are a few businesses which are excluded:
- banks, insurers and reinsurers (but not insurance brokers)
- public-sector bodies
- further-education establishments, if they are grant-funded
- state-funded primary and secondary schools
What help is available:
The Bounce Back Loan scheme will help small and medium-sized businesses to borrow between £2,000 and £50,000 for a period of up to 6 years. The loan amount cannot, however, exceed, 25% of their annual turnover.
The government will guarantee 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. No repayments will be due during the first 12 months.
The government will work with lenders to agree a low rate of interest for the remaining period of the loan.
Who are the lenders?
The government will work with approved lenders on a similar basis to the Coronavirus Business Interruption Loan Scheme (CBILS) https://www.src-time.co.uk/blog/coronavirus-business-interruption-loan-scheme-cbils-major-update
The list of approved lenders has not yet been published but it is expected to correspond with the CBILS list, which includes nearly all high street banks.
How to apply
The scheme requires filling in a two-page self-certification form online. Applications may be made on 4 May 2020, when the scheme goes live.
What if my business has already received a CBILS loan?
You cannot apply if you have already received a CBILS loan.
However, if your lender has made you a loan of up to £50,000 under CBILS and you would like to transfer it into the Bounce Back Loan scheme, you can arrange this with your lender until 4 November 2020.
What if my business does not recover after the lockdown ends?
Although firms do not get government money if they cannot repay a loan, the scheme is designed to encourage banks to lend to firms when they might ordinarily turn down a loan application, because the state shoulders all of the risk.
Unlike the existing loan scheme, banks will not retain any of the risk for these loans, and therefore will have no recourse to your business if you default as a result of business conditions after the pandemic.
Is this better for me than a CBILS loan?
If your turnover is below £200,000 per annum and you are not seeking to borrow a large amount then yes.
Unlike CBILS, which has a 80% Government guarantee for lenders this scheme has a 100% one and allows for loans at below £25,000. In addition these loans will not require forward looking criteria or complex eligibility requirements. You will be able to apply for a loan using a short and simple online form.
SRC-Time are one of the South East’s leading accountancy firms in advising individuals and businesses in all aspects of their accounting and tax affairs and we are able to assist in any issue raised above.
Our expert team is available to provide you with advice and can be contacted on 01273 326 556 or you can drop us an email at firstname.lastname@example.org or speak with an account manager to get any process started.