Should you apply for the Government bounce back loan on Monday 4 May 2020?

Here’s what we know:

It will launch on 4 May 2020.

The Bounce Back Loan scheme will help small and medium-sized businesses to borrow between £2,000 and £50,000 (or 25% of your turnover if lower).

The government will guarantee 100% of the loan and there won’t be any fees or interest to pay for the first 12 months.

Loan terms will be up to 6 years. No repayments will be due during the first 12 months.
The government will work with lenders to agree a low rate of interest for the remaining period of the loan.

You cannot apply if you already have a CBILS loan, however, if you’ve already received a loan of up to £50,000 under CBILS and would like to transfer it into the Bounce Back Loan scheme, you can arrange this with your lender until 4 November 2020.

Should you apply?

If you need cash to ensure your business survives, then yes. It’s a fantastic support from the Government.

But even if you don’t think you need it, you should think about these points first:

The furlough grant currently comes to an end on 30 June 2020 and we don’t know if it will be extended. Furlough claims have far outstripped Government expectations and it is estimated to cost them £50 billion by the end of June.  Given all the other support they are giving, can they afford to extend it?

So let’s consider that the furlough grant is not extended but also the Government doesn’t allow you to re-open for business until 1 Sep 2020. That’s 2 months with staff costs and no furlough grant to cover it, not to mention your rent to pay etc etc.

One approach to consider

Apply for it. Get the maximum you can.

But only spend it if it’s essential to survive.

At the end of year 1, you can then decide whether it’s good cheap financing that you can afford to pay back over the coming years, or in fact, you didn’t need all (or some) of it in the end, and so you just pay the remaining balance back before interest starts being applied.