MARTIN Lewis’ Money Saving Expert website has revealed how a new government ‘Bounce Back’ loan can help those who have fallen through income support gaps during the coronavirus pandemic.
Small businesses and self-employed workers can now apply for a state-backed loan worth up to £50,000 with no interest or repayment for the first 12 months.
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In a new blog post, Money Saving Expert has described how each loan can be used to provide income support for those who aren’t covered by other schemes.
They’ve revealed how banks such as Barclay’s, Lloyd’s and NatWest are offering loans to their business customers, but they must already be signed up to the banks.
Meanwhile HSBC is offering the loans to all new and existing customers and popular mobile banking app, Monzo, is not taking part in the scheme at all.
The loans range from £2,000 to £50,000, and may be granted up to six years.
No repayments or interest are required during the first 12 months but afterwards, there is a 2.5% interest rate.
When applying for the loan, customers need to contact their banks directly and detail their annual turnover, account number, amount they want to borrow, copy of their tax return and that their business has been impacted by the pandemic.
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Those who are eligible include businesses which are running by March 1 this year, were not in difficulty on December 31 last year (and if it was, you must confirm your business complies with additional state aid restrictions under the state aid rules), is currently not using another loan scheme from the government such as Coronavirus Business Interruption Loan Scheme or Coronavirus Large Business Interruption Loan Scheme, is not in debt, liquidation or restructuring.
Businesses that aren’t eligible for the loans include credit institutions, insurance companies, public sector organisations and state-funded primary and secondary schools.
Martin said the Bounce Back Loans are a "potential stop-gap" for businesses and self-employed affected by the virus – but should be taken with caution.
He said: “Clearly this is far from ideal, these are loans, and the official support systems are non-repayable grants. However, until and if something else is developed, for many this is the only show in town (though always check if you’re eligible for universal credit).
“The lack of repayment and interest in the first year makes these loans far more attractive for a struggling business or struggling business owner than normal finance.
“Of course my general rule is never borrow more than you need to, and aim to repay as quickly as possible. Ultimately this is still debt, and debt’s like fire, used well it’s a useful too, used badly it burns."
The money expert has previously revealed how people can claim back tax if working from home during the crisis.
He also pleaded with Chancellor Rishi Sunak to tweak furlough rules to help people who’ve lost new jobs.
We've also compiled a guide on what to do if you have been made redundant while on furlough.
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