Thanks for the updates on your experiences in applying for the Bounce Back loans. From the information provided we are now able to clarify the terms of the loans.
The below terms came from Nat West but all banks’ terms are required to be the same. The terms are as follows;
- You can borrow up to £50,000 or 25% of your turnover, whichever is lower
- The first year is repayment and interest free
- The amount can be borrowed over a term up to 6 years
- The government will meet the first year’s interest costs on the loan
- The interest rate offered is 2.5% fixed over the remaining 5 years
- There are no charges for overpaying or repaying the loan early
- There are also no set up costs in relation to the loan
The loans will be available to apply for up to the 4th November 2020 so that gives you plenty of time to assess whether you will need to apply for a loan.
From the above information the key points we have taken from this are:
- Even if you don’t need the loan at the moment you may want to consider applying and keeping in a separate account just in case. If in a 3 months you hit a pinch point in your cash flow then it’s there immediately to access rather than having to go through the application process when your cash reserves have already been depleted.
- Following on from the above point. We have had clients apply for the Bounce Back loans with both Santander and Barclays. The turnaround has been very quick with funds being received within 2 days of application. So if the banks continue to release funds this quickly then you may want to wait to apply if cash reserves are ok at the moment.
- If in a year when hopefully everything has returned to normal (or the new normal) and you didn’t require the loan then this can be repaid without any cost to your business.
- As an indicator, if you decided to/are able to borrow the full £50,000, based on the 2.5% interest rate and repaying the loan over 5 years you would be looking at a monthly repayment of £886.75, with a total amount of interest of £3,204.79 being payable over the length of the loan.
I include links below to our blogs on bounce back loan which include more details;
One final point is that this is a loan, not a grant. Before applying for the loan you need to be confident that you will be able to meet the monthly repayment cost once they do become due.
As always, if you have any questions in regards to the above please do not hesitate to get in touch.