We won’t keep you guessing – Rishi wrote to the banks last night to tell them that the interest rate on Bounce Back Loans will be set at 2.5% per annum.

His exact words were:

“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. As such, and incorporating a range of data, I have come to the decision that the rate should be set at 2.5%.”

He also announced a new minimum lend of £50,001 for the CBILS loans. This is to avoid any confusion over which loan to apply for:

  • Up to £50,000 – apply for a BBL
  • Over £50,000 – apply for CBILS

The applications for BBLs are due to go live on Monday. I spoke to a couple of lenders yesterday and they’re working hard to get the forms up and running!

With a 2.5% interest rate, the Government funding the interest for the first year, no personal guarantee, and no capital repayments in Year 1, they are likely to be very popular.

Although we haven’t yet seen the forms and what you have to certify over any use of the funds, it’s likely that a lot of businesses will actually use the opportunity to repay other, more expensive, loans to benefit from the 2.5% rate.

As a reminder of the details:

  • Borrowing from £2,000 to£50,000
  • Amount capped at 25% of turnover
  • No interest or capital repaid in first 12 months
  • Loan lengths up to 6 years

To be eligible, you need to tick three boxes:

  1. You’re based in the UK
  2. You’ve been negatively affected by Coronavirus
  3. You weren’t an undertaking in difficulty on 31 December 2019

Should you get one?

This is cheap money that is very easily accessible, and with no personal guarantees. You could borrow £50,000, pay nothing for 12 months and then have payments under £900 for the next 60 months.

Therefore, it will make a lot of sense to look at borrowing.

However, please do be careful. Think about those repayments that start next year – can you afford them?

Also, remember that “no personal guarantee” doesn’t mean “no consequences” if you can’t repay. The Banks are obliged to do all they can do to recover the money. If you’re a Ltd Co, they can’t chase you personally, but they can refuse to open a bank account for any future business.

And you do also need to keep an eye on the rules on Insolvent or Wrongful Trading. These are quite complex but they mean that a Director can be personally held responsible and penalised if their business trades with no chance of repaying debts.

Overall, though, we would certainly recommend looking at whether a BBL or a CBILS could help your business. 

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Any questions?

If you’d like a meeting or a Skype call to discuss this, please get in touch with your favourite Liverpool accountant