Following widespread criticism of the availability and effectiveness of the Coronavirus Business Interruption Loan Scheme (CBILS), the government introduced an unprecedented support package to help companies and their shareholders survive these challenging times – the Bounce Back Loan Scheme (BBLS).
Bounce Back Loans are designed to help Britain’s Small and Medium Enterprise’s (SMEs) get through the current government-imposed restrictions on business, and give them the resources to ‘bounce back’ quickly once trade is permitted to resume.
SMEs now have access to loans worth up to 25% of its annual turnover, up to a maximum of £50,000. They are provided interest-free for the first 12 months, which is a relief to many. There will be a competitive rate of 2.5% levied afterwards and fixed for up to six years and the government provides security for 100% of the loan amount, lowering the risk to lenders. The government have stated that the successful applications to pay-out stage should take 24-48 hours.
As the government is providing the banks security for the full loan amount, company directors will not need to provide a personal guarantee to underwrite the borrowing. Not having to provide a personal guarantee becomes extremely valuable if the company is unable to recover from the impact of Covid-19, or otherwise finds itself in financial distress at a later date.
So what can you use this cash injection for?
It must be used in a way which will provide an economic benefit to the business.
– Boosting working capital
– Improving general cash flow
– Pay salaries
However, it cannot be used to increase them, nor can it be used to pay dividends unless there is adequate profit showing on the balance sheet.
Businesses must confirm that they have been ‘adversely impacted’ by Covid-19 and also that their company was not ‘in difficulty’ prior to 31st December 2019. ‘Difficulty’ is defined in a number of ways including being in bankruptcy, liquidation, or undergoing a process of debt restructuring. Businesses that were in difficulty as of 31st December last year may still be eligible for a Bounce Back Loan, although this is likely to be a reduced amount and it may come with added restrictions on how the funds can be used.
If you wish to apply for the “Bounce Back Loan” you will need to speak with your bank to begin the process. Here are the application forms of those providers who can assist you. Providers are mainly only accepting (or prioritising) existing customers first. Check out our other Nordens article on the Bounce Back Loan Scheme to find a full list of bank providers, as well as their application forms HERE.
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