Microbusiness £ 50,000 Bounce Again Loans – How They Work
UPDATED: The government's bounce-back loans program has been extended to January 31, 2021.
We have answered some of the most frequently asked questions about the program.
Can I have 2 bounce back credits?
You cannot get two different bounce back loans as such. However, due to recent changes, you can top up your existing bounce-back loan if you haven't borrowed the maximum amount.
How can I extend / increase a bounce back loan?
The best way to increase your loan is to replenish it (if you haven't claimed the maximum amount that you are already eligible for).
When does the bounce back loan end?
The bounce back loan ends on January 31st.
Are bounce back loans written off?
Bounce back loans can be written off as they are loans to your company, not you as an individual. In the event that your company goes into liquidation or administration, your loan will be written off.
It is estimated that a significant portion of the bounce-back loans will be written off. The Bureau of Budgetary Responsibility (OBR) estimates that up to 40 percent of bounce-back loans could be bad.
Will there be a second bounce back loan?
There wasn't a word about a second bounce-back loan.
Bounce back loans so far
More than 100,000 small businesses applied for the new government-funded loans within hours of being set up.
Barclays said it had approved 6,000 loans totaling £ 200 to 20 million, while Santander received 10,500 applications and the Royal Bank of Scotland – which hired 50 percent more call center staff to handle bounce-back loan applications has received – 22,000 had received 2 p.m.
As of 5 p.m., Lloyds reported having received over 26,500 loan applications for the loans, while the Royal Bank of Scotland had received 30,000 and Santander had received 18,000.
HSBC said it received 34,500 requests, although 14,700 were from new customers who first had to conduct fraud checks.
In this regard, small and medium-sized businesses typically take out around 20,000 loans per month.
Lloyds, Barclays, and RBS are offering bounce-back loans to existing customers initially as they have completed anti-money laundering and other checks to meet the government's request for the money to flow into borrowers' accounts within 24 to 48 hours.
Only HSBC accepts non-customer micro-businesses.
Yesterday, David Oldfield, director of commercial banking at Lloyds, told MPs on the Treasury Select Committee that around 11 percent of small businesses typically failed, rising to 30 percent in the 2007-09 financial crisis.
Anne Boden, the executive director of Starling, told MPs she was concerned that banking processes were "not taking the load off" and she thought there might be a "problem of scale" here.
Government Launches Bounce Back Loans Program
The government has launched its bounce-back loan program, which offers loans between £ 2,000 and £ 50,000 at a fixed rate of 2.5 percent.
The 2.5 percent fixed rate is designed to encourage bounce-back loan borrowing versus sluggish demand for coronavirus emergency loans. Almost 60 percent of small businesses will not take out a Coronavirus Business Interruption Loan, according to the UK Chambers of Commerce.
And this upper limit of 2.5 percent only sets in after the interest-free 12-month period has started.
This is less than half the minimum interest rate on Coronavirus Business Interruption Loans (CBILS).
Chancellor Rishi Sunak said, “Small businesses will play a key role in creating jobs and securing economic growth as we recover from the coronavirus pandemic. The bounce back loan program ensures they are getting the funding they need, helping them recover and protect jobs. "
Microbusiness £ 50,000 Bounce Back Loans – How They Work
The government has launched its micro-business bounce-back loan program with an above-expected limit of £ 50,000 and a 100 percent guarantee.
- Businesses can borrow between £ 2,000 and £ 50,000 and access the cash within days
- There is no sales cap for a micro-company applying for a BBL
- Loans range from £ 2,000 up to 25 percent of a company's sales or £ 50,000, whichever is lower
- Loans are interest free for the first 12 months and companies can apply online using a short and simple form
- Borrowers complete a two-page application form confirming that they have a viable business and waiving the lenders' obligation to carry out their own checks
- The term of the loan is six years, but early repayment is allowed with no early repayment fees
- No personal warranties are allowed, and no restoration action can be taken on a primary private residence or vehicle
- All companies trading from March 1st can receive cash
- Banks no longer need forward financial data or business plans
- If you have already had a coronavirus business interruption loan of up to £ 50,000, it will roll over to the bounce back loan program
- Eligible companies are subject to customer fraud, AML (AML), and Know Your Customer (KYC) checks by default prior to granting a loan
- The borrower is always 100% liable for the debt
Is Your Small Business Eligible For A Bounce Back Loan?
However, any company can apply for a microbusiness loan:
- You must be a UK resident and incorporated by March 1, 2020
- Have been adversely affected by the coronavirus (Covid-19)
- Confirm that you are not currently using a government-sponsored coronavirus loan program (unless you are using BBLS to refinance an entire facility).
- You must not be in bankruptcy, liquidation, or debt restructuring
Where Can You Find Your Bounce Back Loan?
Bounce Back Loans accredited lenders are listed on the British Business Bank website:
What is striking, however, is the lack of Metro Bank and any fintechs who find it difficult to lend trading money compared to this extraordinarily cheap loan.
As a financial technology expert told The Times, why should you seek out an alternative lender who may charge a high interest rate "when you can get (almost) free money from the bank"?
Given that micro-businesses are being asked to apply for BBLs with their own banks, Metro is currently lacking for their business customers.
How To Apply For A Bounce Back Loan
Businesses are required to complete a short online application form on their lender's website, which will themselves confirm whether they are eligible for a bounce-back loan facility. Eligible companies are subject to standard customer fraud, anti-money laundering (AML) and KYC (Know Your Customer) checks.
Some state aid restrictions may apply to applications.
Take credit from the Consumer Credit Act
The Chancellor and his team have also removed less than £ 25,000 bounce back loans from the Consumer Credit Act of 1974 to expedite implementation.
At the same time, the government will enact legislation as early as possible to dispense with sections 140A-140C of the Consumer Credit Act for BBLS loans. Bankers feared they might be breaking consumer credit law, that they might not knowingly lend money to failing businesses.
Under the state of the Consumer Credit Act, a micro-business borrower who gets into trouble could claim that the credit terms created an unfair relationship between him and the lender and banks would need to show they did not.
Bounce back loans should be grants
Mark Neath, director at Old Mill, argues that a lot of these bounce-back loans go bad because the government has apparently already accepted why not just give the cash grants instead of the loans?
Neath said, “Why not just give a grant and save the banks and business owners a lot of work, and ultimately stress and pain, to end up in the same place?
“The media story I read day in and day out is that banks' lending criteria refuse to give credit to companies. Perhaps the story should be: Bank lending criteria protect companies from improper borrowing. "
Emma Jones, founder of the Enterprise Nation small business support network, said, "These new bounce-back loans will fill one of the gaps that micro-businesses face. The Chancellor is right that under normal circumstances this group is less interested and less able to take on debt – but can now feel a little more certain that this bridging loan now exists.
“The big question now is whether the banks can actually do the job and get these loans out the door within 24 hours. The other question is whether they are affordable in the long run. "
Rain Newton-Smith, CBI's chief economist, said: “The Chancellor stands shoulder to shoulder with small businesses to help them navigate the crisis. A 100 percent government guarantee on credit and an easy way to apply will be a lifeline for many small businesses and sole proprietorships who are under pressure.
“Banks have worked at full throttle and have to stay at full speed to get more money out the door faster. Time is of the essence. "
Brian Palmer, tax policy expert with the Association of Accounting Technicians, added, “The introduction of bounce-back credit, backed by government guarantees, a low interest rate, no processing fees, and 24-hour turnaround time, is just that Right that small businesses have asked. The loan amounts are not huge but are significant enough to help out right away. However, there will be some concerns that if the lockdown were eased, the rebound might not be robust enough to allow small businesses to make the repayments. "
The Treasury Department is rescuing small businesses in common areas
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