The Bounce Back Loan (“BBL”) scheme was introduced last year with the idea to help small businesses who would be struggling due to coronavirus.  So far over a million loans have been issued, and the government has recently announced some changes.

BBL’s are 100% state-backed loans and you can borrow up to £50,000.  Here are the key things you need to know before you considering applying:

  • The closing date for applications is now 31st March 2021 which has been extended from the end of January.
  • You can borrow between £2,000 and £50,000 (with the maximum being 25% of the business turnover or £50,000)
  • If you have previously taken out a loan but not the full amount, you have the option to top up on your original borrowed amount (min £1,000).
  • You won’t be charged interest in the first twelve months . You now have the ability to defer the payments for an extra 6 months, but interest will still be charged twelve months from the initial loan. The interest rate is 2.5%.
  • You can repay early with no penalty.
  • Loans can last up to 10 years.
  • Holiday payments or interest only periods of up to 6 months can be taken (with limitations).
  • The loans are unsecured.
  • Credit ratings won’t affect eligibility and will only go on your business credit report, not your personal one.
  • They can be used to pay off existing finance.
  • You don’t need a business bank account but you do need to be a business.
  • You can still apply for other Government personal support alongside a BBL.

To apply for a loan you will need to contact the bank directly and fill in a short online form.  Here is a link to the banks offering the loans: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/current-accredited-lenders-and-partners/

Heath Warning:

  1. in some cases, mortgage lenders have restricted the amounts they are prepared to lend where a business has taken out a BBL
  2. The proceeds of a BBL can only be applied for business purposes.  There have already been several prosecutions where the BBLs have been misused.
  3. Dividends can only be paid from a company when there are distributable reserves. A BBL is not income and cannot be distributed as a dividend.
  4. Although BBLs are advertised as being guaranteed by the government, this guarantee only kicks if the business becomes insolvent. The guarantee is only there to protect the lender, not the borrower. Unless there has been any wrongdoing, there should be no personal liability.

If you would like to discuss this further, please get in touch.

We strongly advise you to seek appropriate advice before taking action on any of the points listed above.

All information contained in this document are correct at the time of writing.  Legislation and regulations may change at any time.

If you are in any doubt, please call us for clarification.

About us:  Leggate Associates Limited was formed by Andrew Leggate LL.B FCMA FCA CGMA who has over 40 years of tax and accountancy experience in industry and practice, and the practice is managed by Joanne Leggate FMAAT, ATT (Fellow).  Our clients range from building subcontractors to multi-million pound concerns and high net worth individuals all over the UK.  Please see our website www.leggateassociates.co.uk  or follow @LeggateAssoc on Twitter for occasional updates.

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