Bounce Back Loans - the bigger picture

Of businesses impacted by the coronavirus pandemic, SMEs have been among the hardest hit. Limited cash reserves meant smaller businesses had less of a buffer than their larger counterparts and many found themselves in desperate need of a financial bridge to see them through the crisis.

Since the start of the pandemic, over a million small and medium-sized businesses have taken advantage of government-backed loans and support, including the Bounce Back Loan Scheme (BBLS).

How have Bounce Back Loans helped businesses?

There’s no doubt that the BBLS initiative will have prevented business failure; in many cases keeping the wolf from the door when coronavirus lockdown meant sharp falls in revenue. A Bounce Back Loans gives a cash injection on very favourable and flexible terms, certainly more affordable than what is available from traditional lenders in normal circumstances.

Here’s how they look at a glance:

• Borrow between £2000 to £50,000 (capped at 25% of your turnover)
• No repayment for the first 12 months
• Interest fixed at 2.5% per annum
• Interest payments for the first 12 months are covered by the Government
• No additional fees including subscription fee, overdue fee or early repayment fee

There are more far-reaching and indirect benefits too. Many SMEs who took out a Bounce Back Loan, implemented cost-cutting measures to allow the funds to see them through to more profitable times.

In some cases, it’s entirely possible that this enforced budgeting may have the positive effect of streamlining overheads and put businesses in a stronger financial position as they return to normal levels of business.

You don’t have to pay interest on the loan – or any fees – in the first year. After that, interest is charged at 2.5% per year.

3 new (ish) things to know about Bounce Back Loans

1. You now have until 31st March 2021 to apply

The BBLS was supposed to end on 30th November and was extended by Chancellor Rishi Sunak along with other economic support measures.

A word of warning though, participating lenders were given finite funding lines from the Government, which in some cases have now dried up. Indeed some providers have already pulled the plug on the BBLS, giving SMEs a smaller pool of lenders to apply to.

There is also likely to be a last minute rush on applications, and with the associated paperwork and background checks, inevitably some businesses will miss out.

2. You may be able to “top up” your Bounce Back Loan

As of 10th November, businesses who haven’t had the maximum amount under the scheme (£50,000 or 25% of total turnover) can apply for a one-off “top-up”.

The kicker with this is that it is only available from certain lenders and you must top-up from your existing Bounce Back Loan Scheme lender.

3. The loans can now last up to 10 years

The term of the loans was originally set at 6 years, but this has now been extended to 10, with the first year interest-free and the rest at 2.5%. However, you can repay at any time without incurring a fee, giving you flexibility and naturally reducing the overall cost the earlier you repay.

What if you have missed out, or when the money runs out?

The BBLS is not “one size fits all” and there will be those that fall “through the cracks” and are unable to get a Bounce Back Loan Scheme for one reason or another.

Additionally, there will be businesses who have had the maximum amount available to them under the scheme, but whose cash reserves are once again dwindling.

Some SMEs are beginning to show signs of recovery, with customers gradually returning and new business coming in. But if you have limited cash flow to fund those opportunities it may feel like your hands are tied, if you can’t buy the stock or pay the staff to fulfil new orders.

There are those businesses that fall "through the cracks" and are unable to get a Bounce Back Loan for one reason or another.

On-demand invoice finance from Penny

No business should be held back by stalled cash flow, especially when they have come this far! Even if sales are recovering, “theoretical money doesn’t pay the bills”.

A major barrier to positive cash flow, for smaller businesses especially, is income tied up in outstanding and late invoices,  and that’s in normal times, let alone in a world emerging from a global pandemic.

Credit Passport has partnered with Penny, who specialise in on-demand selective invoice finance for SMEs and small businesses.

Their unique online platform delivers real-time funding decisions and fast payments - paying your invoices upfront while your customers pay on their normal terms.

Penny is inclusive for all businesses, particularly those that tend to be underserved by traditional lenders. What’s more, they aren’t interested in your trading history, turnover or complicated financial forecasts, and they don’t require personal guarantees or debentures.

• Invoices up to £100,000 advanced
• Pre-approval for instant funding
• No setup fees, subscription or tie-ins
• No personal guarantees
• No credit check
• No debenture
• No minimum invoice value
• No minimum turnover
• No forecasts required
• No minimum time of trading 

For businesses whose Bounce Back Loan has been declined or exhausted, this could be the solution to your cash flow worries and give you the breathing room to grow.

To find out more, click here