New Government Scheme – the Coronavirus Bounce Back loan
What is it?
This is a new 100% Gov’t underwritten loan scheme, announced on Monday.
Who is it for?
Small businesses who would like to borrow up to the lower of 25% of turnover and £50,000. To be eligible you need to have been a viable UK business as at 31st December 2019; but are now negatively affected by the coronavirus.
Actually, we’re not totally sure about the 25% of turnover rule, as Rishi mentioned this when he introduced these new loans, but this hasn’t been echoed in the official guidance follow up.
Why has this new loan scheme been announced?
Because the previously announced Coronavirus Business Interruption Loan Scheme (CBILS) is difficult to access, takes forever to sort and requires a mountain of accounts and projections in support before the application is then safely filed away and forgotten. So thankfully HM Gov’t thought it would have another go.
What are the main terms?
Well, for starters there will not be any fees or interest or repayments due in the first 12 months.
We’re told that the application will be a simple self-certification process and the money should arrive quickly (within 24 hours apparently; don’t hold your breath). But no real details yet.
We do not know the interest rates on the loan after year 1, but the guidance says that ‘the government will work with lenders to agree a low rate of interest on the loan’.
There’s a max 6 year term, so be aware that repaying a six year £50K loan over 5 years at, say 4%, costs around £920 each month from years 2 to 6.
Interest and repayment free for 12 months sounds good: can I use a Bounce Back loan to pay down my other loans?
Maybe. We don’t see why not at the moment, but await more guidance. All we can say for sure in relation to other loans is that you can’t have a Bounce Back loan if you’ve already got a CBILS loan.
I have more than one business: can I have more than one Bounce Back loan?
There’s nothing in the guidance so far that suggests you can’t do this. But these loans are to be administered by the banks and the banks may not allow this.
Will I have to provide any security?
We’re not sure whether personal guarantees will be required. But it seems likely because otherwise what’s to stop owners of small limited companies burning through the loan, before then winding up the business and walking away?
Sounds good, where do I apply?
Full details are not available yet and probably won’t be until Monday 4th May when the scheme is due to be launched. You’ll probably apply through an online portal with your normal business bank or one of the other accredited banks.
As ever, we will get more information to you when it becomes available.