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Coronavirus: Bouncing back with a Bounce Back Loan

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At the start of May 2020, the Government launched a new scheme to help businesses affected by coronavirus; the ‘Bounce Back Loan’ Scheme (BBLS). Following criticism of the Coronavirus Business Interruption Loan Scheme (CBILS), the chancellor announced the new Bounce Back loans to help small businesses gain quicker access to funds, which will help them recover from any hardships brought on by the coronavirus.

What is a Bounce Back Loan?

The Bounce Back Loan Scheme is designed to speed up and simplify the application process for businesses. Applicants can apply for loans between £2,000 and £50,000, with the aim of getting the funds into the business’ account within 24 hours. These loans are guaranteed by the Government, with no interest or extra fees to pay for the first year.

After 12 months, the interest rate is 2.5% per year.

How is it different from the Coronavirus Business Interruption Loan Scheme?

While the Coronavirus Business Interruption Loan Scheme (CBILS) had been launched to help businesses struggling from coronavirus-related debt, the scheme faced criticism for the length of time it took for banks to approve the loans, and for businesses to receive any money.

CBILS allowed businesses access to various financial options, whereas the BBLS is a straightforward fixed-term loan, and there is no fee to the lender. No repayments are due within the first year, and the loan will last for six.

On 24 September 2020, the Chancellor of the Exchequer announced BBLS loans will be extended to 10 years.

Although the Bounce Back Loans are still distributed by government-certified lenders, no personal guarantees are required, and the process should be much quicker than Coronavirus Business Loans.

A full list of differences between the two schemes can be viewed here.

Is my business eligible for a Bounce Back Loan?

As with Coronavirus Business Loans, if you wish to apply for a Bounce Back Loan, you must meet certain eligibility criteria:

  • Your business must have been established before March 1st 2020
  • Must be struggling from the effects of the coronavirus
  • UK-based

Similarly, your business cannot apply for a Bounce Back Loan if it was any of the following:

  • In the public sector
  • A state-funded school
  • A bank, insurer, or a reinsurer
Coronavirus Bounce Back

What if I still need to liquidate?

Even with a Bounce Back Loan’s funding, with severe debt, a company can still find itself having to liquidate. Liquidation is still an option if you have a Bounce Back Loan, which becomes an unsecured debt in those circumstances.

What happens to a Bounce Back Loan in liquidation?

What if I get rejected for a Bounce Back Loan?

If your business falls into one of the restricted categories or doesn’t meet the eligibility criteria, there are other options available. You can apply for other government financial aid schemes, or if your business is insolvent, speak to us and we’ll assess your situation, and advise you the best way forward.

Commercial finance

Even if you aren’t approved via the Government’s schemes, you can still apply for commercial finance. Commercial finance is an umbrella term for several types of financial agreement. These include: Invoice and asset finance, bridging loans, or invoice factoring. Speak to our advisors at WF Financial Solutions to discuss which of these options would be most beneficial for you.

More information on commercial finance options

Business Recovery

There are several company recovery options for your business if it becomes insolvent. If the business would be viable without the burden of its debts, you can explore a Company Voluntary Arrangement (CVA), which allows a limited company to repay its debts in affordable monthly instalments. If your debts are more severe, you can explore administration, where a third-party takes control of the business and makes the necessary changes. If the bulk of your debt is to HMRC, you can apply for a Time to Pay Arrangement (TTP); these informal arrangements allow you to repay your debts over 12 months and pause creditor pressure.

More options for company recovery

Sole traders can apply for an Individual Voluntary Arrangement (IVA), which works similarly to a CVA, but is made for individuals and the self-employed.

More options for sole trader debts

Business Closure

Sometimes your debts can be so severe that your company cannot recover. In these cases, you may find it beneficial to close the company down via a Creditors Voluntary Liquidation (CVL). Doing so is preferable to creditors applying for a winding-up petition and means they could receive a more substantial return from the closure.

More options for company closure

In summary

Bounce Back Loans have been announced to allow coronavirus-impacted businesses quicker access to finance, which may help them through the difficulties caused by the coronavirus. Successful applicants can borrow between £2,000 and £50,000, with no interest or repayments for a year, with the loans guaranteed by the Government. If your business isn’t eligible for these loans, you can still apply for other government financial assistance. Alternatively, you can speak to an independent finance broker to explore commercial finance options. If you’re insolvent, there are several options which will either help your business to recover, or allow it to close in an orderly manner.

How we can help

If your business is suffering from financial problems, whether it’s related to the coronavirus or not, speak to us today. Our initial advisors can provide free, impartial advice with no obligation. We can talk you through the options available and set you on the path best suited for your business; whether that’s applying for one of the Government’s schemes, independent commercial finance, or an insolvency procedure.

Authored by Lisa Hogg

Lisa Hogg

Director & Licensed Insolvency Practitioner

Beverley Horton Christopher Callaghan Stephen Hall

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