Bounce Back Loans Scheme: Expert discusses how they work
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Bounce Back Loans are available to businesses hard hit by the coronavirus pandemic. More than 1.5 million Bounce Back Loans have been issued since the scheme was first launched, but now businesses hoping for help have just days left to apply. But how exactly do Bounce Back Loans work and can you claim one of these loans before the deadline hits?
The official unemployment rate for the UK has dropped to five percent, down from 5.1 percent before.
The number of people employed in the UK is still 693,000 lower than last February before the Covid lockdown began.
There is still a lot of uncertainty in the job market, with people aged under 25 continuing to bear the brunt of the job losses.
The number of redundancies across the UK also fell slightly to 11 per 1,000 people in January, down from 14 per 1,000 two months previously.
But many experts believe the financial hardship as a result of the crisis is far from over.
What are bounce back loans?
The Bounce Back Loan scheme was launched in the UK last year.
They are available to smaller businesses looking to access finance more quickly during the Covid pandemic.
The scheme enables small and medium-sized businesses to borrow between £2,000 and up to 25 percent of their turnover.
The maximum loan amount is £50,000.
The Government guarantees 100 percent of the loan and there are no fees or interest charges for the first 12 months.
After this interest-free period passes, the interest rate will be 2.5 percent.
The scheme is open to new applications until March 31, 2021.
If you already have a Bounce BackLoan, you are entitled to borrow more to top up your existing loan to the maximum amount.
This top-up must always be claimed before March 31, 2021.
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Who is eligible for these loans?
Small and medium-sized businesses interested in Bounce Back Loans are only eligible if they:
- Are based in the UK
- Were established before March 1, 2020
- Have been adversely impacted by the coronavirus pandemic.
You are not entitled to apply for the Bounce Back Loan if your business is in the following sectors: banks, insurers and reinsurers (but not insurance brokers); public-sector bodies and state-funded primary and secondary schools.
In addition, you are not entitled if you are already claiming:
- Coronavirus Business Interruption Loan Scheme (CBILS)
- Coronavirus Large Business Interruption Loan Scheme (CLBILS)
- COVID-19 Corporate Financing Facility.
Those who have already received a loan of up to £50,000 under one of these schemes can transfer it to the Bounce Back Loan scheme – but you have until March 31 to arrange this.
How long is your loan for?
The length of your loan is six years, but you are entitled to repay it early without incurring a fee.
Repayments are not required in the first 12 months.
Before your first repayment is due, you may be entitled to extend the term of your loan or move to interest-only payments for a fixed period.
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