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The new Bounce Back loan Scheme (BBLS) has opened for applications for businesses in the UK and we've pulled together some of the key features and a selection of the questions that we've had so far.
Here are the most commonly asked questions from our clients in relation to the "Bounce Back Loans" that we've had over the last few days:
Unlike Business Interruption Loans (CBILS), you do not have to go to the bank you currently use. The only issue with approaching a new bank for BBL’s would be the time needed to set up a new account. Businesses can set up feeder accounts (they close once you have received the BBL) but this does add additional time on to the application.
If you’re looking for a simple process, approach the bank you have a current account with. BBL’s are simple application forms that are completed online.
The stock answer here is the lower of 25% of Turnover in the calendar year, 2019 or £50,000. Whilst it may seem easy at the moment to take on additional debt you need to mindful that that in the long run, it may give you and your business(s) a real headache. It’s important to remember BBL’s are incredibly easy to access and are available until November 2020 so you can take time to consider this loan.
We advocate taking this opportunity to pause (where possible) and assess short term cashflow in detail to pin down the right amount of BBL required. If you have reviewed cashflow over the past weeks and months, things are evolving constantly and we recommend you revisit the exercise again.
When completing a cashflow exercise, think about the period between now and Christmas, draw on what you have learnt from discussions with your team, peers, customers, advisors, suppliers and so on, a lot of judgement is required in plotting your expected income and expenditure over the period.
Although there is no right or wrong way to model cashflow, we recommend assessing cash burn when looking at working capital requirements. The most simplistic way of calculating cash burn is the following:
If opening cash in week 1 is £30,000 and closing cash in week 25 is £-90,000, cash burn would be £120,000/25 = £4,800 or £20,000 per month deficit. We must not ignore any weeks, which may fall lower than the closing balance of £-90,000 however.
An increased cash balance across the period would indicate you do not have a cash burn, and cashflow issues are likely to be limited and you may not need a BBL
We’ve seen confirmations of loans within two to three hours and bank have communicated that they expect funds to be released in a matter of days.
There would be no requirement to repay the loan early if your businesses circumstances change for the better. Equally, if you do decide to repay the loan early, there are no early repayment charges or costs associated with doing this.
No, the idea of this loan is that it’s self-certified. Ultimately, you should only apply for the loan if you and your business have been impacted by COVID 19 but neither the bank nor government require you to disclose what the money will be used for. There is no monitoring of the money once paid nor do you need to justify exactly what the money is to be spent on from the outset.
Early indications that around 75% of applications are accepted. There are varying reasons for this but ones we are aware of include:
It’s important to understand the reasons why the application has been rejected as it may be possible to remedy those reasons before applying to another bank.
You cannot qualify for a BBL if you were an undertaking in difficulty at 31.12.19 (or latest annual accounts). This means your balance sheet shows accumulated losses and share capital (plus share premium) that does not cover those accumulate losses two times over.
Yes – if you started to trade on or after 1 January 2019, you should calculate the maximum loan as being 25% of your estimated Turnover from the date your started to trade. For example, if you started to trade on the 1 February 2019, you apply the 25% cap to Turnover from 1 February 2019 to 31 January 2020.
BBL’s are another form of commercial lending and are treat exactly the same if payments are missed.
No, BBL’s are completely unsecured and do not require any sort of personal guarantee or other security.
Summary and making an application
Hopefully you are clear on amount of BBL that you and your business needs, that most of your questions are answered and now it’s time to complete the online application. To help you, here are a list of current BBL accredited funders and you can click on the logo to go to the application page.
When making the application, you will need the following information to hand:
If you would like to have a quick chat to us about any of the above, request a call and we will be in touch!