Boost for small businesses
Chancellor sets Bounce Back Loans interest rate at 2.5%
Banks will only be able to charge 2.5% interest on the government’s new fast track loans for small businesses once the interest free period for the first 12 months is over.
In a letter to lenders, Rishi Sunak said he has decided what should be the rate for the Bounce Back Loan Scheme (BBLS) which is aimed at getting quick finance to the smallest businesses hit hard by the impact of coronavirus.
"As a 100% guaranteed loan scheme, the price of BBLS is critical to its success: together, we need to ensure that these loans are affordable and accessible, he wrote.
"As such, and incorporating a range of data, I have come to the decision that the rate should be set at 2.5%."
Due to launch today (4th May 2020), the government has promised the application process will be quick and simple with limited information required and most companies will get the money within 24 hours of being approved. Businesses can borrow up to 25% of turnover with a maximum loan of £50,000. There is a 100% guarantee for the lender.
What is a bounce back loan?
Small businesses will benefit from a new fast-track Bounce Back Loan Scheme which will help small and medium-sized businesses borrow between £2,000 and £50,000. The main points of the scheme are:
- The government will guarantee 100% of the loan
- There won’t be any fees or interest to pay for the first 12 months.
- Loan terms will be up to 6 years.
- No repayments will be due during the first 12 months.
- The government will work with lenders to agree a low rate of interest for the remaining period of the loan.
- The scheme will be delivered through a network of accredited lenders.
You can apply for a loan if your business:
- is based in the UK
- has been negatively affected by coronavirus
- was not an ‘undertaking in difficulty’ on 31 December 2019
Who cannot apply
The following businesses are not eligible to apply:
- banks, insurers and reinsurers (but not insurance brokers)
- public-sector bodies
- further-education establishments, if they are grant-funded
- state-funded primary and secondary schools
If you’re already claiming funding
You cannot apply if you’re already claiming under the Coronavirus Business Interruption Loan Scheme (CBILS).
If you’ve already received a loan of up to £50,000 under CBILS and would like to transfer it into the Bounce Back Loan scheme, you can arrange this with your lender. This arrangement must be done before 4 November 2020.
How to apply
More information from the UK Government can be found here.
Contact Hentons today!
If you would like to know more about the Bounce Back Loan Scheme, and how Hentons can help with any future applications. Please complete the form below and one of our experts will be in contact.