What do you need to know
Will it be the scramble to set up a home office/school from the same dining room table within days? Perhaps a rare family barbecue in a garden in August or being able to spend a little time with relatives at Christmas?
For business owners, it might be juggling online trading with managing staff furloughs to keep your best employees on the payroll for when you’ll be able to use their talents again.
We probably won’t especially remember the day you took out a Bounce Back Loan (BBL) but it could end up being the pivotal decision that, in retrospect, was the most important for the business.
The bounce back loan was a guaranteed government backed scheme designed to help small businesses gain access to funds relatively quickly.
They could borrow between £2,000 and £50,000 from an accredited lender interest and payment free for the first 12 months before a fixed interest rate of 2.5% begins accruing. They could also be “topped up” within this period if the company’s borrowing requirements change.
Even the scheme’s biggest fans might have been surprised by how popular the interest has been.
Over 1.6 million BBLs were approved since the product launched in May 2020 – which is the equivalent of three every minute. The total value of this lending adds up to £46.53 billion.
Craig Beaumont, Chief of External Affairs at the Federation of Small Businesses (FSB) said: “1.6 million small businesses have now been helped to keep going through an awful year by securing bounce back loans.
“As the unlock takes place, the economic recovery will rely on the successor scheme to fire on all cylinders.”
The BBL scheme will close for applications on 31st March 2021, along with the Coronavirus Business Interruption Loan (CBILS and CLBILS) and all will immediately be replaced by a new Recovery Loan Scheme from 6th April.
A Treasury spokesperson said: “This will run until the end of the year to ensure lenders can continue to have the confidence to provide support and viable businesses can access government backed finance throughout 2021 following the disruption of the pandemic.”
The loans can be used for several businesses purposes including paying staff wages, settling business rates or rents and for regular monthly outgoings such as water and power bills.
They can’t be used for non-business purposes nor to pay dividends to directors or placed in high interest savings accounts as a lump sum.
All good things come to an end including the bounceback loan scheme.
The first repayments agreed when taking out the BBL are about to come due, if they haven’t already been extended for six months, so many businesses are having to juggle with making these payments very soon, whether they have been able to begin trading again fully or even partly.
The system started slowly before getting up to full speed as lenders grappled with the new product and had to work to incorporate it into their existing portfolio of borrowing options for businesses.
The lending criteria for the BBLs was different and in some cases less stringent than the banks’ usual procedures and safeguards so this had to be allowed for although the delay would understandably add to prospective borrowers worries at an already uncertain time.
When Barclays got their scheme operating they eventually approved 196,137 bounce back loans totalling more than £6 billion.
In their latest available figures, Santander said they had loaned over £4.5 billion to over 135,000 successful applicants while NatWest had lent £8 billion to nearly 100,000 business borrowers.
Will repayment be a problem?
If repaying your bounce back loan is going to be a problem then the best thing you can do is to get in touch with us straight away.
We can advise you on what options are available to you depending on your individual circumstances and can work through a range of scenarios with you.
You might not have to close down your business or look at liquidation after all.