Freelancers, micro businesses and small businesses have been hit hard by the recent pandemic. Particularly those who’ve missed out on funding opportunities due to the nature of their businesses. From mobile hairdressers with no fixed premises, to limited company directors who are technically employees of their own businesses.
The good news is, the government has recognised this and has now introduced a new scheme to help those who may have fallen through the cracks of previous businesses support measures.
To help small businesses and sole traders get through financial struggles caused by the Coronavirus pandemic, the government has announced their new ‘Bounce Back Loans’ scheme.
What is the Coronavirus Bounce Back Loan Scheme?
The Bounce Back Scheme allows UK businesses to borrow between £2,000 and £50,000 and according to the government website, you should receive the cash within just days of sending your application.
The scheme was launched on the 4th May 2020 and is available to any UK business that’s been negatively impacted by the Coronavirus pandemic. The loan is interest free for the first 12 months and no repayments will be required until after this time.
Who is eligible for a Bounce Back Loan?
If your business is based in the UK and has been negatively impacted by the Coronavirus pandemic, you are eligible to apply for a Bounce Back Loan.
There are however some businesses who are not eligible for the loan. These include banks, insurers (but not insurance brokers), reinsurers, public sector bodies and state-funded schools. Unfortunately if your company fits into any of these categories you will be unable to apply for the Bounce Back loan.
What’s more, if your business was established after 1st March 2020, you will not be eligible for the loan.
How much can I borrow?
You can apply for up to 25% of your company’s annual turnover (capped at £50,000). For example, if last year your business had a turnover of £50,000, you can apply for a loan of up to £12,500 (maximum).
As mentioned above, the loan will be interest free for the first 12 months. After the first year, interest will be charged at a flat rate of 2.5% for the following 6 years. This is considerably less than the average interest rate of a personal loan, making the Bounce Back Loan scheme a very attractive deal for those who are eligible.
What if I can’t repay the Bounce Back Loan?
The scheme is designed to last for 6 years, giving you plenty of time to make the repayments. You also have the option of repaying the loan early without receiving a penalty.
What’s more, the Bounce Back Loan is reassuringly unsecured. This means that it’s not protected by any collateral, so if you can’t repay the loan, your assets will not be taken from you.
If you’re unsure as to whether or not to apply for this loan due to current outstanding debt, then it may in fact be your saving grace. This is because the Bounce Back Loan can in fact be used to pay off any existing finance you currently owe.
How do you apply?
Applying for the Bounce Back Loan is quick and easy. Simply follow the steps on the government website and you’ll be redirected to the British Business Bank webpage, which provides you with everything you need to know to be able to apply for the loan.
Please note: The information provided in this article covers the latest updates at the time of writing (6th May 2020).