Business owners who have been impacted by coronavirus can apply for a 100% state-backed loan worth up to £50,000, with no interest charges or repayments needed in the first 12 months. More than 1.26 million bounce back loans have been issued and recent changes mean you’ve now got until 31 January 2021 to apply, while you can ‘top up’ if you’ve not borrowed the full amount.
How the bounce back loans work
- You can borrow between £2,000 and £50,000; the amount is capped at 25% of your total turnover (usually for calendar year 2019, or new businesses can estimate).
- You can now ‘top up’ an existing bounce back loan. This applies to businesses that haven’t already borrowed the maximum amount permitted under the scheme (ie, 25% of total turnover). This option can only be used once, the option has been available since 10 November 2020.
- No interest will be charged, and no repayments will need to be made in the first 12 months.
- After 12 months, all banks will charge a fixed 2.5% annual interest.
- You can repay the loan early without penalty.
- The loans can now last for 10 years. So that is a year interest-free, and the rest at 2.5%. The loans were originally set up to last for six years, but this has now been extended to 10 – which the Government says could cut the monthly repayments by almost half, though you will end up paying more interest. However, you can repay at any time without paying a fee, which gives you flexibility – and of course, the sooner you repay once interest is charged, the smaller the overall cost.
- You can now take a payment holiday and/ or interest-only periods of up to six months, this includes the option to:
- Move to interest -only payments temporarily up to three times, with each interest-only period lasting up to six months, and/or
- Take one payment holiday over the length of the loan, where you pause repayments entirely for up to six months. You can use this option once you’ve made at least six payments (whether capital and interest or interest only).
- The loans are unsecured.
- Your business must have been established before 1 March 2020.
- You need a business to set these up but don’t need a business bank account.
- Bounce back loans don’t affect your eligibility for other Government support.
- You have until 31 January 2021 to apply, but don’t delay as many providers have been ‘overwhelmed’ by the volume of applications.