Thinking ahead and Bouncing Back
The Bounce Back Loan Scheme (BBLS) that launched on Monday could be a real game changer for small businesses. Instead of fighting your bank for an overdraft, we’ve seen that applying and getting accepted for a Bounce Back loan is straightforward as a limited company and could be the key for the hard slog to 2021.
What are the terms?
BBLS is available through a range of accredited lenders. Lenders can provide a six-year term loan from £2,000 up to 25% of a business’ turnover, to a maximum of £50,000. The loans have a full government-backed guarantee against the outstanding balance of the facility (both capital and interest).
The terms on offer are incredibly attractive compared to usual business lending;
* 2.5% interest rate
* no interest or repayments in the first 12 months
* no early repayment penalty
So, it’s worth thinking ahead to the next 12 months of trading and what cash your business may need.
The first stimulus measures implemented by the government were to prevent an immediate fall out from the pandemic. In effect, a Phase 1 for business to allow them to absorb the immediate shocks and gauge the impact of coronavirus.
As we enter Phase 2 next week, it’s important to start to plan for how the creative industry will begin unlocking itself and when the productions will begin rolling. That way, you can consider whether a loan may help to tide over your business until you start to see invoices coming in at pre-COVID19 levels.
Case study example.
Imagine you’re in charge of production for a homewares shoot for Christmas 2020. Planning might begin in late May, with the shoot taking place in early July. That means invoicing is likely to happen in two tranches, June and July, with monies landing in your bank account a month or more after that. You might consider the BBLS to hire the equipment and staff needed for planning and the shoot in July, to tide you over until you get paid.
It is going to be crucial to plan cash flows over the next 12 months to ensure that the cash is on hand to deliver on the first jobs in the new normal. We aren’t advocating taking on debt for debt’s sake, but we recognise that by the time the first repayments of the loans start in 12 months, most businesses will be through the worst of the crisis and will have the liquidity to pay part or the majority of the loan back.
The old adage, ‘cash is king’ still holds true, but the cash flow forecast is going to be your best friend and the Bounce Back Loan Scheme, the fuel to your Phoenix.
If you have any questions about the Bounce Back Loan Scheme, get in touch and we’d be happy to help. Call us on 0203 026 4679 or drop us an email at email@example.com.
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