Bounce-back loan scheme – is this the lifeline SME businesses need?


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Monday 4th May sees the launch of the Government’s bounce-back loan scheme. The scheme is aimed at small and medium-sized businesses and allows them to borrow 25% of their turnover, up to a maximum of £50,000, via a straightforward application process. It is hoped that it will create an important financial lifeline for these entities.

Eligibility

You are eligible to apply if your business:

  • is based in the UK;
  • has been negatively affected by coronavirus; and
  • was not an ‘undertaking in difficulty’ on 31 December 2019.

Broadly speaking, an undertaking in difficulty is considered to be in difficulty when, without intervention of the state, it will almost certainly be condemned to going out of business in the short to medium term. This includes situations where (a) a company’s accumulated losses are equal to or greater than 50% of its subscribed share capital or (b) in the case of a company where at least half of its members have unlimited liability for the debt of a company (e.g. partnerships) where more than half of its capital shown in the accounts has disappeared as a result of accumulated losses.

BUT

The following businesses are not eligible to apply:

  • banks, insurers and reinsurers (but not insurance brokers);
  • public-sector bodies; and
  • state-funded primary and secondary schools.

Additionally, you cannot apply if you are already claiming under the Coronavirus Business Interruption Loan Scheme (CBILS). However, you can arrange with your lender to transfer a CBILS loan of up to £50,000 to this new scheme until 4 November.

Terms

The basic terms are as follows:

  •  Applicants can borrow between £2,000 and £50,000;
  • No fees or interest to pay for the first 12 months.
  • Loan terms will be up to 6 years.
  • No repayments will be due during the first 12 months.
  • 100% of the loan is guaranteed by the government;
  • The government will work with lenders to agree a low rate of interest for the remaining period

Summary

It is hoped that this new scheme will be a game-changer for this crucial part of our economy. The scheme has been designed to ensure that these entities requiring vital cash injections can get access to this in a very short timeframe. The loans will be simple to apply for via a short, standard online application form. It is intended that the funds should reach successful applicants within days. Entrepreneurs, growth companies and small firms will now be able to access transformational finance without enduring time-consuming background checks and completing complex application processes.

For further information please contact a member of the team above.

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