Despite all good intentions, the Coronavirus Business Interruption Loan Scheme (CBILS) has failed to meet expectations.
The UK Government has now responded with a staggeringly popular alternative, the Bounce Back Loan Scheme (BBL).
The loan is supposed to be astoundingly easy to apply for, utilising an online application form with only seven questions on it. But, like any loan, if it is rejected due to an incorrectly answered question, trying to apply for it a second time will be nearly impossible.
Key points of the BBL scheme
The loan is 100 per cent government-backed for lenders, allowing for low interest rates. (Currently, this is set to a flat rate of 2.5 per cent interest).
You can borrow between £2,000 and £50,000 “with the cash arriving within days”.
If you have previously applied and been approved for the Coronavirus Business Interruption Loan Scheme, you can switch over to the new loan scheme.
The government will foot the bill of any fees or interest for the first 12 months.
What can disqualify you for a BBL?
If your business was already struggling before COVID-19, then you will most likely not be approved for the loan. The purpose of the loan is not to “bail out failing businesses”, but to assist those businesses which were trading on 1 March of this year, and which have “not been in financial difficulty”.
This is bad news for firms which were indeed in financial straits but, had the lockdown not been ordered, might’ve started on the road to recovery as a result of recent marketing campaigns. If your business falls into this category, it would well behove you to seek financial guidance before applying.
Which lenders are participating?
You may apply from one of the ten Bounce Back Loan Scheme accredited lenders:
- Bank of Scotland
- Barclays (partnered with Pearl Accountants)
- Clydesdale and Yorkshire Banks
- Danske Bank
- Lloyds Bank (partnered with Pearl Accountants)
- Ulster Bank
A loan is still a loan — a rock and a hard place
A loan must be repaid by the borrower, and the government website is quite clear on this point. Failing to do so could result in worse financial straits than you are in right now.
All of the Exchequer’s schemes for businesses, and “cash injections” into the economy, have been nothing more than loans. These payments will come due at one point.
Still, after five weeks of no business, the new loan scheme is a desperate lifeline that many high street businesses have been looking for. The ease with which this loan can be applied for only makes it that much riskier if you have not taken into account the long-term effects of borrowing to keep up with your bills.
If you are in such a position, you might want to sit on the decision for a day or two to make sure that the difficulties you might face later, as a result of applying for the loan, will not be worse than the problems you are in right now.
The BBC reports that “The British Chambers of Commerce has said that about 30% of its members say they cannot afford to take on more debt.”
What does a business do in such a situation? Does it bite the bullet and take the debt, hoping it can repay it later? Or does it weather the storm and expect to get back on its feet when the weather is good again?
These are challenging times, requiring difficult decisions. For many, the loan is the only way out. It’s a matter of saving a sinking ship by any means necessary and dealing with the consequences later.
We and our banking partners can help you get the loan
If you happen to be in a position where your business might be rejected for the BBL, even it is your final lifeline, we might be able to assist.
We are partnered with both Lloyds and Barclays and can try use these contacts to help push the loans through, as well as to speed up the process of obtaining the loan.
We are all in this together. Not only must we stay healthy and prevent the spread of this terrible disease, but we must also help each other avoid the collapse of the UK economy. It is within all our interests to ensure that our fellow business owners and even our competitors stay in business during and after this crisis.
Once the lockdown is over, we need an economy to go back to, and ensuring businesses get the financial assistance they need is one way we can lend a hand during these unprecedented times.