Bounce Back Loan Scheme For The Self Employed | RJP LLP

Updated: 25 September 2020

Although not an ideal solution, the new Bounce Back Loan Scheme (BBLS) launched by the government offers a valuable source of cash for taxpayers who are not eligible to claim other coronavirus support such as a grant through the Furlough Scheme or Self-Employed Scheme.

Whilst the BBLS is a loan and needs to be repaid, the terms are especially favourable as an emergency stop gap. Compared to other traditional business loans, they are unsecured, attract no interest in the first 12 months and have very favourable 2.5% interest rates for the remainder of the 10-year term. There are additional new terms for holders of these loans announced in the government’s Winter Economy Plan.

Analysis of the eligibility criteria for these loans has highlighted there are no restrictions over using them to supplement income levels and they can be repaid early with no penalties incurred.

In particular, the loans will be beneficial for:

Newly self-employed people who have not yet submitted a self-assessment tax return (however you must have been trading before 1 March 2020);
Self-employed workers with profits in excess of £50,000;
Self-employed workers who have business earnings that are lower than income from other sources e.g. rental property income;
Limited company directors who take the majority of their income as dividends; and
Business owners with an existing outstanding loan looking for a payment holiday and lower cost replacement in the longer term.

To find out more about BBLS and how to apply we recommend speaking to your existing business banking provider in the first instance. They will be able to advise you about making an application.

This article provides some general useful information to assess your eligibility and understand what terms you should expect.

Is my business eligible for a loan?

You can apply for a loan if your business:

Is based in the UK;
Has been negatively affected by COVID – 19; and
Was not in difficulty as at 31 December 2019.

You cannot apply for a loan if your business is a:

Bank or insurer (this does not include insurance brokers);
Public sector body;
Grant-funded further education establishment; or
State-funded primary or secondary school.

You also cannot apply if you are already claiming under the Coronavirus Business Interruption Scheme. However if you have already received a loan of up to £50,000 under this scheme and would like to transfer it into a Bounce Back Loan Scheme, you can arrange this with your lender until 30 November 2020.

How much can my business borrow?

Businesses will be able to borrow up to a maximum of 25% of their turnover up to a maximum of £50,000. Minimum loans being £2,000.

What will the loan terms and the interest rate be?

Loan terms will be up to 10 years and no repayments or fees will be due during the first 12 months. The loans will attract interest at 2.5% fixed for the period. Borrower is responsible for 100% of the debt.

As announced on 24 September 2020 by the government, it is also possible to obtain an interest free payment holiday without incurring any negative impact on your credit rating. Further details about the new terms are available in our article: New terms for bounce back loans

How can I claim?

The loans will be delivered through the networks of banks via a short standardised online form which will launch for applications on Monday 4 May 2020. The government website also offers further information: https://www.gov.uk/guidance/apply-for-a-coronavirus-bounce-back-loan.

How quickly can I access funds?

The government say they will work with lenders to ensure loans delivered through this scheme are advanced within days of applications being made.

When more information is published about how to apply for a loan, we will share that information.

If we can help you in any way with accountancy or tax services during this time then please contact partners@rjp.co.uk

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