If your business has been adversely affected by the Covid-19 crisis you may be able to apply for a state-backed loan to aid its recovery. These are worth up to £50,000 and no interest is charged for the first twelve months. Similarly, to help with your cashflow, you won’t need to make any repayments for a year.


These loans were introduced in response to fears that small businesses were finding it difficult to access the funds they needed in a timely manner. They differ to the Coronavirus Business Interruption Loan Scheme which can be for much higher amounts and are aimed at larger businesses.


The scheme is administered by the British Business Bank who have accredited a range of lenders. You make your application to a particular lender who will then accept or reject your application. If one lender turns you down, you can then apply to another.


Bounce Back Loans are all about helping small businesses respond to the challenges presented by the Covid-19 crisis.


Is your business eligible?


If your business is UK based, was established before March 2020 and has been adversely impacted by the Covid-19 pandemic you are able to apply for a business bounce back loan.

Some exemptions apply. You can find out more about eligibility on the government website .


Using your loan


The aim of the scheme is to help businesses through the short to medium term difficulties arising out of the pandemic. Therefore, the funds should be used as working capital to help keep your business afloat.


Priority should be given to:


• Paying salaries

• Paying suppliers

• Payments on existing loans

• Paying utility bills and other overheads

• Any other arising business costs



Preparing for an uncertain future


After these costs have been met you can then use remaining funds as a cash reserve to help maintain cash flow. This is important as it helps to build future resilience. It’s uncertain at present just how the Covid-19 crisis will develop. Future lockdowns and further restrictions cannot be ruled out, and as time passes it’s likely that funds available from central government and other sources will begin to taper off. Therefore, any funds that you can currently access should be used as wisely as possible. This is probably not a time to be thinking about expanding your operation.


Supporting your own income


While many business owners have lived off their savings for the past few months if their business cannot pay them a salary, it’s not sustainable over the long term. The government have confirmed that a Bounce Back Loan can be used to support the business owner’s income as well as pay the salaries of any employees. However, they cannot be used to pay dividends. If you are a director of a company and usually take your income as a dividend, you may not be able to take all or any of it as you would normally.


Breathing space


Business Bounce Back Loans are unlikely to save every struggling business, but they can provide valuable breathing space during the ongoing crisis. By prioritising the most pressing costs and using any surplus to help build resilience, your business can be in a strong position when the current economic uncertainty finally abates.


For more advice about the most effective way to use a bounce back loan and how to use it to aid your business recovery, speak to the expert team at Morgan Reach today.