Small businesses struggling due to the coronavirus pandemic should be able to apply for a quick and easy-to-access loan of up to £50,000, with no interest charged or repayments needed in the first 12 months. Bounce back loans are 100% government-backed for lenders and businesses can expect to receive the money within days of making an application.
The bounce back loan may be a particularly useful support facility for those who have been unable to access the other support measures, for example, those who are self-employed but do not qualify for the self-employment income support scheme (SEISS), or for limited company directors.
Currently, businesses have until 4 November 2020 to apply for a bounce back loan, but the Government may extend this deadline if needed.
Bounce back loans are separate from the coronavirus business interruption loan scheme, which is for larger amounts, but not 100% government-backed.
The key features of the bounce back loan scheme can be summarised as follows:
- The business can borrow between £2,000 and £50,000, although the maximum limit is capped at 25% of total turnover (usually for the 2019 calendar, or estimated turnover for a new businesses)
- No interest will be charged, and no repayments will need to be made in the first 12 months of the loan period
- After the first 12 months, all lenders will charge a fixed 2.5% annual interest, which is currently much lower than rates applying to a typical personal loan.
- The loans are unsecured
- Loans may be repaid early without a penalty charge being incurred.
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