Amidst a significant backlog in processing applications from businesses for Coronavirus Business Interruption Loans (CBIL), Chancellor Rishi has announced a new Bounce-back loan scheme.
Businesses will now be able to apply direct for loans ranging from £2,000 – £50,000 (utpo 25% of turnover) over a period of upto 6 years.
These will be 100% backed by the government (vs 80% backing for CBILS loans) and will be re-payment free for 12 months. The government will also pay any fees and interest due in the first 12 months. Interest thereafter will be at government-mandated 2.5%. Furthermore, we also know that early repayment is available without any additional fees.
The Government’s aim with this is to allow smaller businesses to access crucial funding support without joining the enormous credit-checking queue at the banks.
With these new loans it will therefore be possible for businesses to complete their own ‘simple’ application. Cash will be available within days.
- There is also no burden on the business to justify the need for the funds. A business need only confirm that they:
- were undertaking a commercial activity on 1 March 2020;
- were not in financial difficulty at 31 December 2019; and
- have been impacted by the Coronavirus.
Cashflow forecasts and projections will not be required.
Conversely, lenders have been scrutinising CBILS applications and requiring applicants to explain the proposed use of funds, adding to delays and increasing the amount of finance that is being rejected.
Funds must however be used for business, and not personal purposes.
Businesses who have applied for CBILS will not be able to apply for bounce-back loans (but can transfer CBILS loans under £50k to this new scheme).
Applications are already open and can be made at any one of a number of approved lenders.
We have been providing wide-ranging support to our clients during these challenging times. If you’re looking for more from your accountant, get in touch to see how we can help.