- 04 May
Bounce Back Loans And Alternatives
UPDATE: CBILS SCHEME DUE TO CLOSE 31/03/2021 - NEW RECOVERY LOAN SCHEME ANNOUNCED.
Today the Government launched the Bounce Back Loan Scheme (BBLS) as part of its response to the coronavirus pandemic, and the impact that this has had on UK businesses. There are alternatives to taking out a loan, or options if you have been declined for BBLS.
Coronavirus Bounce Back Loan Scheme
The BBLS loan scheme is aimed at smaller businesses, requiring a loan of up to £50,000 (a maximum of 25% of their annual turnover is allowed). The UK Government is providing the funding via banks, and the Government are offering a 100% guarantee to the banks, for the value of the loan.
The loan is over a term of six years, with no repayments or interest made in the first 12 months. Thereafter, interest is charged at a fixed interest rate of 2.5% per annum. The borrower remains liable for the repayment of the full value of the loan, and interest and charges - despite not having to provide a personal guarantee. This will be welcome news for many small businesses, as the approval rates on the CIBILS scheme have been low in proportion to the number of enquiries.
Alternative To A Bounce Back Loan
Many small businesses will not want to take on additional debt in such uncertain times. In these cases, other alternative options may be more attractive, specifically those that do not involve taking on the debt associated with a loan.
Invoice finance is an alternative to a bounce back loan whereby a business is able to access part of the value of its outstanding sales invoices to debtors, in advance of the customers paying. The nature of the facility, means that you are accessing your own money, that you are already owed, in advance of when you were going to receive it, rather than taking out the burden of a loan. This option may be more palatable to some companies.
Furthermore, although the Bounce Back scheme has only just opened, there are likely to be some companies that do not qualify for the support, or are declined. Once again, in these instances there may be alternative alternative finance options available which can help them find the funding that they need to get through these difficult times.
If you would like to discuss your options and alternatives, please call Sean on 03330 113622.