Bounce Bank Loans Update
Post Author:
Rona Burns
Date Posted:
February 10, 2021
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Over 1.4m businesses took out Bounce Back Loans worth nearly £45bn to get through the current pandemic. The Chancellor has now advised that these businesses will have even greater flexibility to repay these loans.
With effect from 8 February 2021 lenders have been told to “proactively and directly inform” their customers about Pay as You Grow. This was first announced back in September and will give borrowers the option to tailor repayments to their circumstances.
https://jsca.co.uk/businesses-given-flexibility-to-repay-loans/
Pay as You Grow has now been extended further and will provide businesses with the following options:-
- To extend the length of the loan from six years to ten
- To make interest-only payments for six months, with the option to use this up to three times throughout the loan
- To pause repayments entirely for up to six months
This is in addition to the government covering the costs of interest for the first year of the loan.
What is a Bounce Back Loan?
The Bounce Back Loan scheme helps small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover. The maximum loan available is £50,000.
The government guarantees 100% of the loan and there will not be any fees or interest to pay for the first 12 months. After 12 months the interest rate will be 2.5% a year.
The scheme is open to applications until 31 March 2021.
If you already have a Bounce Back Loan, but borrowed less than you were entitled to, you can top up your existing loan to your maximum amount. You must request the top-up by 31 March 2021.
Who is eligible to apply for a Bounce Back Loan?
You can apply for a loan if your business:
- is based in the UK
- was established before 1 March 2020
- has been adversely impacted by the coronavirus
If your business was classed as a business in difficulty on 31 December 2019 you will need to confirm that you are complying with additional state aid restrictions.
Businesses from any sector can apply, except:
- banks, insurers and reinsurers (but not insurance brokers)
- public-sector bodies
- state-funded primary and secondary schools
You cannot apply if you are already claiming under:
- Coronavirus Business Interruption Loan Scheme (CBILS)
- Coronavirus Large Business Interruption Loan Scheme (CLBILS)
- COVID-19 Corporate Financing Facility
If you have already received a loan of up to £50,000 under one of these schemes you can transfer it into the Bounce Back Loan scheme. You have until 31 March 2021 to arrange this with your lender.
How do I apply?
There are 29 lenders participating in the scheme including many of the main retail banks. You should approach a suitable lender yourself via the lender’s website.
The lender will ask you to fill in a short online application form and self-declare that you are eligible.
The lender will decide whether to offer you a loan or another type of finance and you will be responsible for repaying 100% of the amount borrowed.
The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.
Photo by Colin Watts on Unsplash
