NEVER has there been a better time to obtain cost-effective funding for those much-needed machinery upgrades…NEVER has there been a better time to obtain cost-effective funding for those much-needed machinery upgrades…
The new Government-secured ‘bounce back loans’ for small businesses offer an incredible one-off opportunity for your business to invest in the future with cheap and guaranteed finance, with no repayments for a year.
Small businesses that are looking for a financial boost, can now apply for a new 100% state-backed loan worth up to £50,000, at just 2.5% interest per annum, and with no interest charged or repayments due in the first 12 months.
In this article, we are going to explain the Bounce Back Loan Scheme in greater detail and outline how it represents a unique opportunity for many businesses operating in the dry cleaning and laundry industries.
How does the loan work?
The Bounce Back Loan Scheme is different to the Coronavirus Business Interruption Loan Scheme, which is for larger amounts and not 100% state-guaranteed. If you’ve already applied for the Coronavirus Business Interruption Loan Scheme, you can apply to have it switched to this scheme if you’d prefer.
Everything you need to know about bounce back loans:
- You can borrow between £2,000 - £50,000, although the amount is capped at 25% of your annual turnover.
- No interest will be charged and no repayments will be required in the first 12 months. After this period, all banks will charge a fixed 2.5% annual interest fee. This is far cheaper than a typical personal loan.
- You can repay the loan early without penalty.
- The loans are set up to last for 6 years. So that's a year interest-free and the rest at 2.5%.
- The loans are unsecured. Whilst that may sound like a bad thing, it’s actually positive. Mortgages, for example, are secured loans, which means they can take your home if you don’t pay. In this circumstance, you don’t give security (the Government does), so it's far more difficult for them to take your assets if you can't repay.
- Your business must have been established before 1 March 2020.
- Credit ratings (business or personal) won’t impact your eligibility, so the loan is incredibly accessible.
- The loan will likely go on your business credit report, not your personal one.
- At least 8 banks are offering these bounce back loans.
- You need a business to set up a bounce back loan, but you don’t need a business bank account.
- Bounce back loans will NOT affect your eligibility for other Government personal support, including the self-employment income support grants and universal credit.
Delving further into the loans’ terms, there are no strict rules on what these loans may be spent on, as long as it is under the banner of working capital or investment – i.e., things to keep the lights on, like debt service, bills, running costs, wages and importantly, new equipment.
Bounce back loans are therefore a channel for support but also represent a massive opportunity to upgrade your equipment to more effective, flexible and sustainable machines, incredibly cost-effectively.
The lack of repayments and interest in the first year makes these loans incredibly attractive for any business, compared to regular finance. The loan can be cleared within the first year before you’re even charged any interest or having made any repayments!
There is a fantastic article on Money Saving Expert which gives more detail on which banks are offering bounce back loans, how the repayments work and common Q&As. You can read it here.
If you have any questions regarding the Bounce Back Loan Scheme, we would be more than happy to discuss it with you. Just give us a call on 020 8579 2661.
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