This week, small businesses and sole traders can start applying for the bounce back loan scheme. The first reaction of most business owners seems to be that they don't want to get into debt as this is a loan scheme rather than a grant, but it still might be worth looking at ...
If you're uncertain about if your clients can pay you right now, and you may want to give people longer terms as a sign of goodwill and to help you keep your business relationships intact, then having extra cashflow right now could be just what you need.
You need to apply through an accredited lender, theses are listed on the British Business Bank website. I am about to go through the process myself with the Co-operative Bank, so I can elaborate on the process once I have done it myself.
Your business must be able to self‑declare to the lender that it:
- has been impacted by the coronavirus (COVID-19) pandemic
- was not a business in difficulty at 31 December 2019 (if it was, you must confirm your business complies with additional state aid restrictions under de minimis state aid rules)
- is engaged in trading or commercial activity in the UK and was established by 1 March 2020
- is not using the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) or the Bank of England's COVID Corporate Financing Facility Scheme (CCFF), unless the Bounce Back Loan will refinance the whole of the CBILS, CLBILS or CCFF facility
- is not in bankruptcy or liquidation or undergoing debt restructuring at the time it submits its application for finance
- derives more than 50% of its income from its trading activity (this requirement does not apply to charities or further-education colleges)
- is not in a restricted sector
The beauty of this loan is it gives you an injection of cash to help you through the next few months at no cost for the first 12 months. You could then choose to repay it in 12 months time with no penalties at all. The government are covering set up costs and the interest payments for the first year. The loan is for a period of 6 years, and interest rates are fixed at 2.5%. Repayments will start after the first 12 months.
Before applying, I recommend talking to your accountant or trusted financial advisor to see if it is right for your business,, but don't take too long about it as we have no idea when this loan will be withdrawn again.
If anything I've written here resonates with you, call me on 01604 420057 and let's see how we can help you.