So I’m writing this the day before the launch of the Bounce Back Loans Scheme where the government is backing 100% of the loan to SME’s. With just 12 hours until the scheme is officially launched here is the latest that we know
Looking at a paper written by the British Business Bank a business applying for a Bounce Back Loan will amongst other things be required to self-declare that:
- It has been impacted by Covid-19
- It was not a “business in difficulty” at 31st December 2019 – it it was then the borrower must confirm it complies with additional state aid restrictions under de minimis state aid rules
- Is a business engaged in trading or commercial activity in the UK and was established by 1st March 2020
- It is not using Coronavirus Business Interruption Loan Scheme, the Large Business Interruption Loan Scheme or the Covid Corporate Financing Facility Scheme – unless the Bounce Back facility will refinance the whole facility. i.e under £50k you can change onto Bounce Back but cannot have both
- Its business is not in a restricted Sector
The scheme has been designed to be as straightforward as possible and will mean that the eligibility confirmations are self-certified by borrowers. The lenders will still need to undertake Anti Money Laundering and Fraud checks on applications.
Other criteria include
- Must not exceed 25% of the turnover in the calendar year 2019, from a minimum of £2k to £50k
- Terms loans up to 6 years
- Early repayment is allowed at any stage without Early repayment charges/fees
- Personal Guarantees cannot be taken
- No Recovery action can be taken against a borrows primary private residence or primary personal vehicle
- No repayments during the first 12 months
- Lenders will have a 100% guarantee from the government
- 2.5% fixed interest rate
- No guarantee or scheme fees charged by the lender
Key Eligibility criteria for Bounce Back Loans
- UK Based businesses established by 1st March 2020
- Its not open to individuals other than sole traders or partners acting on behalf of a partnership
- Most industries are eligible except
- state funded education sector,
- entities providing insurance (other than insurance brokers),
- deposit taking banks
- Borrow must be able to self declare the details in the application
- A borrower must not be in bankruptcy or in debt restricting proceedings or liquidation – at time of application
- More than 50% of the income of the business must be from trading activity – except for charities or a further education college
Bounce Back loans – what we need to know
So from the paper on the British business bank website its implying that the business must have been trading during 2019 – due to the 25% turnover restriction but then also says the business just have been established by 1st March 2020 – does this mean that new start up businesses are eligible and if so how will they self-declare turnover for periods under 1 year?
There doesn’t seem to many other restrictions on the loans – but it does say that decision making on borrower eligibility is devolved to the lender – does this mean that lenders will still be declining applications and for what reasons – false information, data not matching bank statements/accounts?
The big question is why don’t we have the information from lenders before the launch to ensure that businesses and borrowers understand the eligibility full and the impact it can have on them and their business.
What other schemes are available?
The Coronavirus Business Interruption scheme is still available to businesses – but with its eligibility slightly tweaked to start at £50,001. With new lenders entering this market and covering overdrafts, loans, invoice and asset finance this is still a viable option for many businesses. Along with the lending scheme the government have a number of other schemes and grants available – and have created a handy support finder to show the possible schemes available to specific businesses. They have also announced a local top up grant that local councils will be able to give out.
How can J&J Commercial Finance Help?
We continue to support businesses in understanding the support available to them. The first stage is look at their cash flow forecasts or help them create one so they can understand the level of funding required. If the government schemes can be used then we will look at the impact on the cash flow before looking at aspects such as the Interruption Loan or Bounce Back Scheme. We continue to work with a number of accredited lenders to help process applications for our clients. Outside of the government schemes we still have lenders open for business.
If you would like a free review of your businesses situation visit our appointment page to book an appointment.