BUSINESS owners such as builders, shop-keepers and hair-dressers who have missed out on government help over Covid-19 can now seek rescue loans.
More than 100,000 small companies and sole traders have already applied for the “bounceback” lending in a bid to stay afloat through the coronavirus pandemic.
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The scheme, which launched on Monday, has been described as a “lifeline” although experts have cautioned firms against rushing into debt.
Here I look at the details.
WHAT ARE THESE LOANS?
They are for small companies and sole traders whose businesses have been hit by coronavirus.
You can borrow between £2,000 and £50,000 but the amount is capped at 25 per cent of your turnover.
No interest will be charged in the first 12 months, and no repayments need to be made during that time, although you can repay earlier without any penalty if you want to.
After a year, banks will charge a fixed 2.5 per cent interest — far cheaper than a normal personal loan. The debt lasts up to six years.
Companies of any size can apply, but the loans are aimed at small businesses with fewer than ten employees and at the UK’s 900,000 sole traders.
To qualify, the business must have been set up before March 1, 2020, and if it’s not trading at the moment, that can only be due to coronavirus.
ARE OTHERS NOT GETTING SUPPORT FOR FREE?
Chancellor Rishi Sunak has offered self-employed people non-repayable Government grants covering 80 per cent of their profits — but many didn’t qualify for this.
Those who lost out include businesses who started after around September 2018, freelancers with only some self-employed work, those with profits more than £50,000 and people who work for themselves via a limited company.
For these, the bounceback scheme is “the only show in town”, according to Martin Lewis, the founder of MoneySaving Expert.
HOW DOES THIS DIFFER FROM BUSINESS-INTERRUPTION LOANS?
Bounceback loans were launched by Rishi Sunak after complaints that his previous scheme, the Coronavirus Business Interruption Loan Scheme (CBILS), was not accessible to many businesses in dire need of cash.
The loans are 100 per cent backed by the Government, unlike the CBILS loans, which were only 80 per cent backed.
This means they are less risky for banks, who are administering the scheme, and should be approved faster.
CBILS offers more money — between £50,001 and £5million — and the interest rate after a year varies by lender but will likely be higher than bounceback loans.
If you go for the bounceback scheme, the rate is the same wherever you go, and you won’t have to provide any business projections, unlike with CBILS.
WHAT IS THE MONEY FOR?
Bounceback loans are being provided as working capital or investment for your business, but crucially this can include paying wages.
So if you want to use the money to support your income, you can. But it’s worth checking with your tax adviser or accountant on what the tax implications are if you plan to pay yourself with the cash.
Martin Lewis said the loans were so cheap a struggling business or business owner could consider getting one to pay off existing finance, and then have a year to pay it off interest-free or for a reduced cost over a longer period.
HOW DO I APPLY?
There’s a simple online application process through the major banks and you don’t need to prove how viable the business is. It will be faster if you apply through your own bank.
You’ll need details of your annual turnover, account number, how much you want to borrow, a copy of your tax return and also to confirm that your business has been adversely impacted by coronavirus.
You don’t need a business bank account.
Traders who use personal current accounts will need to provide their 2018/19 income tax self-assessment return to prove their eligibility.
No security and personal guarantees are necessary.
HOW MUCH SUPPORT CAN I APPLY FOR?
You can’t apply for a bounceback loan and a CBILS loan.
But if you’ve already applied for a CBILS loan, you can ask for it to be switched to this scheme.
Or if you’ve already received up to £50,000 you can transfer it into the bounceback loan scheme.
This must be done by November 4.
You can apply for a bounceback loan as well as getting a self-employed income support grant.
If you’re still struggling you may also be eligible for Universal Credit.
Some of the thousands of businesses applying
- Builders, electricians and plumbers
- Dog groomers
- Small shops that have closed, selling books, clothes
- Taxi firms
- Personal trainers
- Wedding planners
- Kids’ entertainers such as clowns
‘£50,000 landed in bank account the next day’
HUSBAND and wife business team Helenor and Mike Rogers applied for a bounceback loan on Monday and were amazed when £50,000 landed in their account the next day.
The couple’s health food company TrooFoods supplies supermarkets including Waitrose and Sainsbury’s but sales in stores had fallen during the lockdown.
The money means Helenor, 50, and Mike, 51, can keep on top of their cash flow, as well as grow their business with initiatives such as developing new product lines, trialling new packaging and advertising on social media.
Helenor said: “It’s tough to get investment right now and other loans for start-ups like us can have convoluted application processes.
“This was perfect, quick and easy – allowing us to get on with driving our business forwards.”
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