Naz Financial

A Personal Financial Blog from Naz Miller

Coronavirus Business Bounce Back Loan Scheme (BBLS): 5 Reasons to Get One and 2 Major Caveats

The Bounce Back Loan Scheme (BBLS) is a Government-designed business loan at favourable terms, for SMEs and other small businesses. In this blog, I will explain why they’re a good thing and why, if you can, you should apply for one.

The BBLS is intended to help small businesses recover from the impact of the Coronavirus and lockdown. Many of my clients operate such businesses and before the BBLS came along, hadn’t taken other Government-backed loans. They may have been unable/unwilling to apply for Coronavirus Business Interruption Loans or the Coronavirus Large Business Interruption Loans.

Bounce Back Loan Scheme Basics

The Bounce Back Loan Scheme is being run by the Government, through its agency, the British Business Bank. They’ve put together a panel of 11 banks to deliver rapid loans to SMEs on strict terms (see below). You can borrow up to 25% of your turnover (2019 actual or estimate), for up to 6 years, with nothing to pay in the first 12 months. The minimum you can borrow is £2,000 and the maximum is £50,000.

1. Great Value Credit Terms

The interest rate is fixed throughout the loan term, at 0% in the first year and only 2.5% thereafter. Much better than you’d normally get from a bank. As such, it represents a great opportunity to borrow and invest in your business.

2. Flexibility

Although the BBLS are available for up to 72 months, you can pay back any amount of the loan, at any time, without penalty. They’re very flexible. Also, you can use the loans in any way you see fit, to help your business to recover from the adverse impact of Coronavirus. You may wish to invest in new marketing initiatives, new product, recruitment, price reductions or simply bolster cash reserves.

3. No Personal Guarantees

Unlike most SME loans, the banks are not allowed to demand personal guarantees. The Bounce Back Loan Scheme is 100% Government-backed, so there’s no risk to the banks, either.

4. Easy to Apply

As the government want these loans to be made quickly, to have maximum positive impact on the economy, they’ve insisted that the application process be quick. So, consequently, the application forms are short and ask for relatively little information. Good news!

5. Choice of Lenders

The first place to start is your own business bank. That’ll give you the easiest way of applying if they’re on the panel. If you’re not sure, or want to see the full list, it’s on the British Business Bank’s helpful website. Each bank on the panel has a link to take you their BBLS offers.

And the Caveats?

Beware! All of the banks on that panel will at least prioritise their own business banking customers above other applicants. Some won’t even put non-customers on a waiting list. Some, like Starling Bank insist that just having an account with them is not enough, you must use them as your primary business account. So, in short, you’re better off going to your own bank first, if you can.

And the second caveat is that not all the banks on that panel are currently offering the Bounce Back Loan Scheme! Yes, that’s right, some doors are locked. The CEO of Tide recently announced that they will not be making any more loans under the BBLS. The reason being that although the Government backs the scheme, it doesn’t make the loans Some challenger banks like Tide have to borrow the money themselves from larger institutions, and those taps have been turned off, at least for now.

So, in summary, the Bounce Back Loan Scheme for small businesses is a great opportunity to invest in your company at exceptionally low cost and with minimal risk. It can help SMEs overcome some of the problems caused by Coronavirus. I’m all in favour of BBLS and recommend you investigate it if you haven’t done so already.

I’m always available for a chat, if you’d like to discuss this and other financial issues. Contact me through the site or give me a call.

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Naz Miller

I'm Naz and I'm a Financial Adviser. Prior to working in private practice, I spent 34 years working at Lloyds Bank in Cambridge and surrounding areas. My work has always focused on helping clients achieve their long-term financial objectives.

Glossary of Personal Financial Terms

AAA Rating

In short, AAA ratings (‘triple-A‘ ratings) are the highest credit rating available for an investment, such as a bond or company.

AAA ratings are issued to investment-grade debt that has a high level of creditworthiness with the strongest capacity to repay investors.

Similarly, the AA+ rating is issued by S&P (Standard and Poor) and is similar to the Aa1 rating issued by Moody’s. It comes with very low credit risk and indicates the issuer has a strong capacity to repay.