Bounce Back loans pass the one million mark

More than one million small and medium-sized enterprises (SMEs) have now taken out Bounce Back loans. The news underlines the popularity of this element of the government’s Covid-19 support for businesses. SMEs that have yet to borrow should consider doing so.

The scheme offers loans of up to £50,000 to any business that has suffered some form of detrimental impact during the pandemic. In practice, that is likely to be almost every business. The loans are available from 11 private sector banks, with the government guaranteeing the debt if borrowers default, and carry an interest rate of just 2.5% a year. A firm pays no interest or charges in the first 12 months.

Many businesses have therefore taken Bounce Back loans to provide themselves with a safety net. With so much uncertainty about the second half of the year, the cash can provide vital reassurance, even if it is not needed right now. Firms that never need to draw down on the funds can then repay the money before incurring interest or charges.

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The scheme is also worth considering if you’ve already borrowed less than £50,000 from the alternative Coronavirus Business Interruption Loan Scheme (CBILS), which carries more expensive charges. You can’t have a Bounce Back loan and CBILS finance at the same time, but you can use the former to refinance the latter, cutting the cost of borrowing. There is still time to arrange a Bounce Back loan; the scheme is scheduled to remain in place until 4 November.