Bounce Back Loans were launched at the end of April by Chancellor Rishi Sunak. They offer loans of up to £50k with the following features:
- Between £2,000 and £50,000 can be borrowed although the scheme is capped at 25% of turnover
- Loans will be interest free for the first 12 months
- Loan terms are up to 6 years
- Neither forecasts nor business plans will be required, the application consists of a 2 page application form
- No personal guarantees are required as the loans are 100% backed by the government
A number of clients have asked whether we feel they should be applying for the loans and increasingly our thinking has been that everyone should be strongly considering it. Our rationale is as follows:
- Business is about investment.
- You have to spend money to get a return.
- You need capital to invest.
- Our skill as business owners is to distinguish between risky and safe investments.
- These loans require no personal guarantee so one big risk is removed – if the venture fails that is the end of it. You could close the company and walk away from the debt.
- The interest rate on the loans make the borrowing very cheap so we are not actually risking that much from our own pocket in interest.
- If we can’t see a way to making money from such a low risk what does that say about us as business people?
That said, we do need a credible plan to make money otherwise we risk the eventual interest payments and potentially the capital itself.
The loan is accessed through a range of lenders listed here. There are some eligibility criteria for loans:
- Your business must have been trading as of 1st March 2020
- You must not be in receipt of a CBILS loan
- Your business must have been negatively impacted by Coronavirus