Businesses have raced to secure loans under a new scheme to help smaller firms through the lockdown crisis, however, there has been major criticism over the banks handling of this.
The Bounce Back Loans scheme went live today with Banks seeing high volumes of applications with Lloyds Banking seeing over 5,000 applications within a few hours this morning
This new scheme offers loans up to £50,000 and is designed to be simpler and quicker than the existing Coronavirus Business Interruption Loan Scheme (CBILS). Major UK banks are saying that most applications that are passed will be paid with 24Hrs
However, the loans have come in for criticism by some businesses, especially smaller ones. Some banks have been applying their usual lending criteria, which makes it harder for smaller enterprises to qualify and the forms are reported to be taking most companies 4 hours to complete
The Treasury insists the new bounce back loans will be easier to apply for. However, firms should think very carefully before taking on new debt as this will have to be paid back.
Which size SME companies can apply?
While the loans are aimed at smaller businesses and sole traders, with £2,000 to £50,000 on offer, there is no limit on the size of business that can apply.
To qualify, a firm must have been trading on 1 March this year and not have been in financial difficulty. The loans are not intended to bail out failing businesses.
When will the money be available?
Businesses should apply through the bank with which they have a business account. The Treasury says funds should then be available “within days”.
Borrowers need to answer seven questions on an online form with information about turnover, tax details, bank account and how the lockdown and Covid-19 have impacted the business. Unlike the other CBIL Loans, the Bounce Back Applicants do not have to provide security or personal guarantees.
Terms and Costs
HMG will cover the cost of fees and interest for the first year. Businesses will only begin repaying the loan after 12 months.
All lenders will charge a flat rate of 2.5% and the loans will last up to six years.
This bounce-back rate is likely to be lower than most CBILS as they are less risky. The government is guaranteeing 100% of the loan from lenders if the firm defaults. With CBILS, the guarantee is 80% of the money.
Ibd has 200 accredited business advisers covering England and Wales and many are actively helping businesses with COVID 19 issues. There will be several advisers near you and can arrange a free initial discussion with a local adviser by calling 01223 597845 or click here