Government Bounce Back Loan for Your Small Business
Originally written by Timothy Adler about small business
What is the Latest Bounce Back Loan News?
The government launched the Bounce Back Loan Program (BBLS) on May 4, 2020 to help small and micro businesses cope with the coronavirus pandemic.
Your small business can borrow an amount that is up to 25 percent of sales and is capped at £ 50,000 per business.
The government takes care of the first year of interest payments, which means you have to pay back the rest of the loan yourself. The interest is set at 2.5 percent per year.
Since the Government Bounce Back Loan is unsecured debt, the 29 accredited lenders, including banks, cannot ask you for personal guarantees. This means that the lender cannot come after your home or personal vehicle if you are in default.
However, the Government Bounce Back Loan must be repaid and is not a grant.
When does the bounce back loan end?
The Government Bounce Back Loan Scheme (BBLS) expires on March 31st.
Am I Eligible To Get A Bounce Back Loan?
With a few exceptions, most companies can apply for bounce-back credit provided they have acted properly before March 1, 2020.
You must not have received any other form of Government Covid-19 financial support, e.g. B. a loan through the Coronavirus Business Interruption Loan Scheme (CBILS).
What can I use the Bounce Back Loan for?
You can only use the loan for the good of the company and not for your personal expenses or any other purpose.
However, some lenders allow you to use your Government Bounce Back Loan to repay existing funds.
What fees and interest will I be charged?
The government has set the interest rate on this facility at 2.5 percent per year. This is far cheaper than a typical personal loan.
Lenders are not allowed to charge fees.
How long do I have to repay my loan?
Originally, loans under the bounce-back loan program were available for a fixed term of six years.
From November 2020 this can be extended by up to 10 years after prior agreement with your lender.
How do I apply for a Covid Bounce Back Loan?
Currently, only Starling Bank accepts bounce-back loan applications from new customers. Every other bank has closed its doors and only accepted bounce back loan applications from existing personal account holders.
Once you’ve chosen your lender from this list here, you’ll need to fill out a short online form that will be self-certified by your company. There are no credit checks.
In some cases, the lender may ask for additional information, such as: B. a tax return for self-assessment by the HMRC. Applications from Eligible Borrowers are subject to customer fraud, AML, and Know Your Customer (KYC) checks.
Bounce Back Loan Calculator
Here is a bounce back loan calculator that can help you figure out what your monthly interest and principal repayments will be. You start paying interest from the 13th month and your monthly payments decrease if the amount you borrowed is broken away.
Can I top up how much I borrow?
Yes you can – provided you did not originally apply for the 25 percent maximum of sales, which was primarily capped at £ 50,000.
But interest will start to increase after 12 months, so it is mainly an option for anyone who has financial problems. This is because the earlier you start paying out, the less interest you will pay.
Your top-up loan will include an additional application and will be added to your total bounce-back loan amount.
The minimum top-up is £ 1,000.
When do I have to start the repayment?
The government covers the interest payable to the lender for the first 12 months from the date on which your original loan was drawn. You will then need to make full repayments – the loan and any interest – by the end of the six-year term under your bounce-back loan facility with your lender.
Your lender will contact the repayments three months in advance. This means that they will contact you nine months after the first loan drawdown.
How long do I have to wait for a decision?
Your bounce back loan should be in your account within a few days of acceptance. Anecdotally, however, some customers had to wait months for their applications to be processed.
Can I repay my loan early?
Full early repayment is permitted at any time with no early repayment fees.
Some lenders allow part repayment and others allow overpayment, allowing you to repay your bounce back loan earlier than planned.
What if i take longer to repay my loan?
The government’s Pay As You Grow option allows you to add an additional six months to the time before you must begin paying Bounce Back Loan interest. This means you have 18 months before starting the repayment. However, the interest is calculated from the 12th month onwards, so you end up paying more.
You can also make interest payments only for six months, although you can use this option up to three times during the life of the loan.
You can also extend your loan term beyond the usual six years to ten years. The government says this could cut monthly repayments by almost half, but you’ll end up paying 2.5 percent more interest.
In addition, you can apply for a one-off six-month repayment leave during the term of the loan.
What if i can’t repay my bounce back loan?
Since a bounce back loan is an unsecured bank, the bank or other lender cannot use your home or car for repayment. However, the bank is entitled to use a debt collection agency, which can include awkward letters and even visits from bailiffs.
However, if your company officially goes into liquidation, the bounce-back loan will remain with the bankrupt company. This means that you and other shareholders on the Board of Directors are protected from confiscation of your assets for repayment.
On the flip side, if the liquidator finds that you knowingly misused bounce back loan funds, you could still be prosecuted.
Learn more about what happens if you take longer to repay your bounce-back loan or if your business goes broke.
Government Bounce Back Loan for Your Small Business