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What Risks Does the Business Bounce Back Loan Hold for my Business?

The Business Bounce Back Loan

9 Jun 2020

Business in the UK is having a tough time. Even before COVID-19 struck, many of our customers had been looking at their business models and cash flow.

Proposed IR35 changes had seriously damaged the confidence of many entrepreneurs, and the dreaded Reverse VAT charge was slowly being rolled out to the construction industry. In fact, Managing Directors, Finance Directors, Partners and sole traders in every sector had some head scratching to do in the wake of Brexit, technology development and climate change.
 
Thankfully, there is some good news. Recently, The Chancellor set out an extension of the Corona Virus Business Interruption Loan. With this, he introduced the Business Bounce Back Loan (BBL) which will be giving many business owners a lifeline. The scheme, already affectionately known as 'Beble', gives access to a Government 100% backed loan, for up to 25% of their Turnover, or £50,000, whichever the lesser. To make things even better, the application has been designed to be as simple as possible with the application form itself is just two pages long! Lloyds Bank reported that on the first day, an unprecedented £1bn of loans was agreed.
 
You may be asking yourself “what’s the catch?” but it appears there is little to deter a company taking the loan. No repayments are required for the first 6 months, the loan is interest free for the first 12 months, and interest is just 2.5% for the remaining 5 years. With no early redemption fees, it’s difficult to see many companies passing up this cheap finance option.
 
What this does highlight, however, is the ever-growing reliance on Finance within business. These programmes may be backed by us taxpayers, but this is only on the assumption the business folds. The money is not a Grant, but a loan to be repaid. Throw into the mix the Overdraft, the Directors Loans that started the company and the other many forms of available finance, then it’s clear that illness or death will start putting a lot of stress on the business. 
 
No longer will business owners see ‘illness' as something that affects other people. Our own mortality, and those of our loved ones has become a real consideration. Going forward, lenders themselves will surely want to see that their finance is secured, and not just against the family home. The loss of people within the company that previously could have been managed will further put pressure on reducing bottom lines. 
 
No matter what your plans are this moment in time, never before has it been so important to review your protection programme. Whether it’s to convert your Relevant Life cover into a personal cover or to protect your business and personal finances from any current or planned lending. Or maybe it’s simply to give your employees access to services that make your company a better place to work, because really, what distinguishes one Working from Home Employer to another now? 

All it takes is 20 minutes to discuss your need with us. It seems like the sensible thing to do. Talk to one of our experts now, on 0203 7640223.

 

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