Banks begin paying out on government backed ‘bounce back’ loans

Since the scheme launched on Monday, we’ve heard mixed reports from publicans trying to access the new government backed loan scheme, with some banks faring better than others.

Under the terms of the scheme, lenders may NOT take any form of personal guarantee, or take recovery action over a borrower’s personal assets (such as their main home or personal vehicle). The scheme is designed to be fast for lenders to process and quick and easy for businesses to access. 

Perhaps understandably given the demand, some banks have been struggling to process the large volume of applications, with customers reporting website crashes.

The government advise that in the first instance, you should approach your own banking provider, but you may also consider approaching other lenders if you are unable to access the finance you require.

The loans are for a terms of 6 years, and there are no repayments for the first 12 months, during which time the loan is interest free. Interest is then accrued at a low rate of 2.5% for the remaining 5 years – but the loans can be repaid early without penalty. The maximum loan amount is £50,000 (up to 25% of a business’ turnover).

For example – if you borrowed the full amount, after the first year you would repay £937.50 each month for 5 years. The total you would repay is £56,250 – so total interest would be £6,250.

Some publicans have reported that their banks, such as Santander have already paid out. We understand most people have found the application process straightforward once they were able to get through.