You are currently viewing Small Businesses – How Could Bounce Back Loans Help You?

Small Businesses – How Could Bounce Back Loans Help You?

Bounce back loans were a type of loan designed to help small businesses get back on their feet after a difficult period. Here we will discuss how bounce-back loans were designed to help, and what you needed to know before applying for one.

Applications for bounce-back loans closed on 31 March 2021. This means you can no longer apply for one or top up your loan. This guide is intended for reference only to help those who have already taken out a bounce-back loan.

What is a bounce-back loan?

A bounce-back loan was a type of loan that could help small businesses recover from a difficult period.

How did bounce-back loans work?

Bounce back loans worked by providing businesses with the funds they needed to get back on track amid the coronavirus pandemic. Bounce back loans were separate from the Coronavirus Business Interruption Loan Scheme (CBILS).

Put simply CBILS enabled businesses to access financial support of up to 5 million if they had been adversely affected by COVID-19. The scheme gave the lender a government-backed guarantee for the loan repayments but the borrower always remained fully liable for their debt.

How did bounce-back loans help small businesses?

Bounce back loans were introduced to help small businesses in several ways. Moreover, a business might have needed a loan for a variety of reasons, including:

  • To purchase new equipment or inventory
  • To expand the business, perhaps with the help of an app that could lead to improved unified communication
  • To cover operating costs

What were the benefits of a bounce-back loan?

If you couldn’t get a loan elsewhere, a bounce-back loan might have been the only option. But what were some of the other advantages of bounce-back loans?

  • They provided businesses with the funds they needed to get back on track
  • They helped businesses resume operations
  • They helped to cover expenses until the business could recuperate any lost revenue

In addition to a bounce-back loan, you probably should ensure that your company is adequately insured. It could serve as an additional layer of protection for your company against catastrophic loss. For example, if you started a construction business and are concerned that you will have to incur losses due to unanticipated circumstances, insurances similar to a Contractor Insurance might be able to cover your business from any type of mishap on the construction site. Aside from that, you could look for similar insurances that can meet the needs of your company based on the type of business you are in.

How much money could you apply for?

According to the British Business Bank, it was possible to borrow between 2,000 and 50,000. The amount was capped at 25% of the total turnover for business (usually for the calendar year 2019, or new businesses could use an estimate).

Businesses also had the option to top up their bank loan. This applied only to businesses that had not yet borrowed the maximum amount permitted under the scheme (also set at 25% of total turnover).

Who could apply for one?

The application process was relatively straightforward, and businesses were able to apply using a short online application form. To be eligible for a bounce-back loan, you had to meet certain requirements. Some general requirements included:

  • You had to be a small business
  • You needed to have been in business for a certain amount of time (usually at least one year)
  • You needed to have a good credit rating
  • Your business had to be in good standing

These conditions might have left you contemplating your chances of getting this loan if you own a small to medium business enterprise. For the pool of questions you have, asking someone from a business accounting background might give you fruitful results.

Could you apply for more than one bounce-back loan?

When the bounce-back loan scheme was first introduced, the question “Can I apply for more than one bounce-back loan” was asked widely. Fortunately for small business owners, the answer was yes – you could apply for more than one bounce-back loan. However, lenders could only apply for one loan for each separate business, unless the businesses were a group as defined by having a holding company.

What are the alternatives to a bounce-back loan?

If you weren’t eligible for a bounce-back loan or just didn’t want to take out a loan, there are now other options available to help your small business.

1. Government grants

Small businesses can apply for government grants to help cover a wide variety of costs. There are different types of government grants available, so it’s important to do your research and see which grant is best for your business.

2. Crowdfunding

Crowdfunding is a great way to get funding from people who believe in your business. You can set up a campaign on a crowdfunding platform and ask people to donate money in exchange for rewards or perks.

3. Business loans

If you can’t get a government grant or don’t want to try crowdfunding, you can also apply for a business loan with your bank. This can be a good option because you can compare rates and fees from different lenders to find the best deal.

4. Ask for help

The most important thing is that you don’t give up on your business. You can ask family or friends for help if finances are tight, or you can even hire an accountant to help get your books in order.

Bounce-back loans might have ended, but other financial help is still available

Ultimately, bounce-back loans helped small businesses get the funding they needed to keep their business afloat. If you have been turned down for financing, don’t fret. There are still options available to you and your company can turn its finances around. Above all, do not be afraid to speak to a financial advisor to determine what type of loan would work best for your needs as a small business owner.