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Coronavirus Bounce Back Loans (BBLS) update

04 - 06 - 2021

Bounce Back Loans (BBL) were intended to provide financial support to businesses during the coronavirus pandemic who were:

 

• Were losing revenue, and seeing cash flow disrupted, as a result of the Covid-19 outbreak
• Could benefit from £50,000 or less in finance.

The scheme opened in May 2020 and closed on 31 March 2021.

BBLS was available through accredited lenders of the British Bank. 

 

The original loans were for a period of 6 years. The loans ranged from £2,000 to a maximum of £50,000. The amount lent was calculated as a maximum of 25% of a business’ turnover.

 

Lenders were not permitted to charge any fees and the government set the interest rate for the loan at 2.5% per annum.

 

Businesses were not required to make any repayments for the first 12 months. However after 12 months repayments and interest become payable.

 

The BBL should only be used to provide an economic benefit to the business and not for personal purposes.

 

The scheme gave the lender a 100% government backed guarantee against the outstanding loan balance. The guarantee included both capital and interest. However the borrower remains fully liable for the debt.

 

Can I repay the loan early?

 

Yes. Early repayment is permitted at any stage without early repayment fees.

 

Can I extend the six year term?

 

Yes. The BBL term loan can be extended from 6 years to 10 years, at the same interest rate, but not anything in between.

 

What are my options if I cannot make the repayments?

If the business is struggling to make the repayments there are 3 options referred to as “Pay as You Grow” options:

1.      Extend the length of the loan from 6 to 10 years;

 

2.      Make interest only payments for 6 months. This option can be used up to 3 times throughout the term of the loan;

3.      Request a 6 month repayment holiday once during the term of the loan.

 

The options are standardised and available individually or in combination together.

 

Are the Pay as You Grow Options automatic?

 

No. The business is entitled to exercise the options but must discuss with the lender when they are going to activate one of the options.

 

Lenders will communicate with the borrower as to the Pay as You Grow Options 3 months before the BBL repayments are due to start. Lenders will inform their customers directly and borrowers should wait until they are contacted by their lender before enquiring about the options.

 

Further Information

 

Further information is available at:

 

www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loanschemes/bounce-back-loans/

 

www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loanschemes/bounce-back-loans/pay-as-you-grow/

 

If you would like to discuss any of the issues noted above please contact us 

 

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Fixed Data

Assumptions

General                                                                                                                              

• The user is over 21 and subject to tax in the UK
• The user wishes to minimise their tax liability
• The user is subject to national insurance i.e.he/she is not over retirement age
• Only current tax rates and limits are applied
• No tax mitigation payments are made e.g. pension contributions
• Only 3 digit letter 'L' tax codes shown in the drop down list can be entered 
• The user does not have a turnover greater than £100,000 where fewer reliefs and or higher taxes may apply

Expenses

• All miles claimed as expenses are for business use using a personally owned car or van
• All other expenses claimed are wholly, necessarily and where appropriate exclusively for the benefit of the business

Foremans LLP Charges

• Foremans fees associated with Limited Company, Sole Trader or Umbrella are as per published rates
• Foremans current Service Costs are allowed for in all calculations.

Holiday Pay

• Holiday pay is accumulated week by week by Umbrella or Agency employer but paid out during the year

VAT

• Limited Company or Sole Trader will be VAT registered
• Limited Company or Sole Trader will take advantage of Flat rate VAT
• Flat rate applied includes the benefit of the additional 1% applicable to the first year of VAT registration

Limited Company Conditions

• One director / one shareholder in a Personal Service Company
• Director of Personal Service Company elects to vote for 100% dividend after salary, costs and expenses
• Director's salary is maximum salary to the primary threshold for NI
• The Limited Company is trading normally i.e it is not subject to IR35 and is not a Managed Service Company

NOTES

• The Current tax rates are taken from the Fixed Data Table
• The current Value Added Tax Rate is 20% and is applied to all invoices and expenses as appropriate
• The Director's Salary is fixed in relation to National Insurance thresholds. Higher Rate Taxpayers should consider the advantages and disadvantages of a larger annual salary or bonus
• Higher Rate Taxpayers may wish to consider the advantages and disadvantages of shared ownership of their business
• Users with a tax code other than three digits and letter "L" may telephone or email our Development Department to request a detailed calculation
• Generally the use of an Umbrella rather than an Agency payroll is only efficient if sufficient weekly expenses are allowable and claimed
• The expenses claimed under an Umbrella should not prevent the proper operation of National Minimum Wage