Since the announcement of the 'Coronavirus Bounce Back Scheme' in April, thousands of companies have applied for the loan and Billions of pounds have been lent to small and medium sized companies by the government.
This Scheme is announced to help small and medium sized businesses to have immediate access to cash. This is important for the continuity of the businesses which in turn will help reduce the unemployment in this time of Covid-19 crisis.
The government is trying to support the businesses by granting loans, grants and different tax reliefs. For example, for employees the government has provided 'Job Retention Scheme' and there is 'Self-employed Income support scheme'. If you are not qualify for anyone of these grants you can apply for this loan. However, you cannot apply for this loan if you have already applied for another government loan such as 'Coronavirus Business interruption Scheme'.
The loan is available till 4 November so If you are self employed or own a small or medium sized business and you are having trouble with the cashlfows, you should avail this.
You will be eligible if you are:
- Based in UK and are 18 years or over
- You started your business before 1 March 2020
- Your Business is adversely affected by the Coronavirus
- Your business generates 50 % of the income from trading
- You are not a bank/ insurer/ reinsurer
- You are not a State funded primary and Secondary Schools
If you fulfil the above criteria you can apply for the loan, but before applying you do have to consider is it really going to help your business.
The Scheme will help you borrow between £2000 and up to 25% of their income. The maximum an individual can get is £5000. The loan is for 6 years. You can repay the loan early without any fees. There is no repayment of the loan during the first 12 months.
How can the Scheme help me: This Scheme will ensure the continuity of the business, this can help provide some access to instant cash to pay wages of their staff, pay the creditor and the day to day running cost of the business.
However do consider the following points as well:
Sole trader or Limited Company: If you are a sole trader then this loan will be treated as a personal loan and the individual will be personally liable for the repayment of this loan. Therefore, you should have a fair idea of your business will be making enough profits to pay back this loan. if you are limited company you won't be able to use this loan to pay yourself dividends unless your business is making enough profits and you do not have enough cash to pay yourself dividends.
Other Debts of the Company: You should consider other debts of the company and the interest rates that you are paying them. If you think this loan will help you continue the business with sufficient cash flows and profits then you should consider this loan otherwise there is no point adding more debt to your company. You can also use this money to pay back any existing finances on which you might be paying high interest rates and this will help you save money.you should go for this loan if you think you will be able to repay this loan.
To have a fair idea of your business make sure you have the cash flow forecast, management account, details of assets, historic account etc. You can provide HMRC with these documents as well when applying for the loan.
The details on how to apply for this loan go to the website: https://www.gov.uk/guidance/apply-for-a-coronavirus-bounce-back-loan
If you need any information or assistance to apply, please contact Taxaccolega Chartered Accountants who are based in Croydon and Southall on 02081270728 or email us at info@taxaccolega.co.uk.