Of the various tools available to support small businesses through the coronavirus crisis, it is the UK government’s bounce-back loan scheme announced on 4 May that is proving most popular, including with farmers.Sources in the local banks indicate that they have been busy processing claims, with most prioritising existing clients rather than taking on new customers. In total, around £15bn has already been lent under the scheme across the UK, nearly double the amount going out on the coronavirus business interruption loan scheme (CBILS). This latter scheme is for larger amounts up to £5m, but comes with more background checks, including proof of ability to repay.
Of the various tools available to support small businesses through the coronavirus crisis, it is the UK government’s bounce-back loan scheme announced on 4 May that is proving most popular, including with farmers.
Sources in the local banks indicate that they have been busy processing claims, with most prioritising existing clients rather than taking on new customers. In total, around £15bn has already been lent under the scheme across the UK, nearly double the amount going out on the coronavirus business interruption loan scheme (CBILS). This latter scheme is for larger amounts up to £5m, but comes with more background checks, including proof of ability to repay.
Given the scheme is 100% backed by government, there is little risk for the banks
Under the bounce-back loan scheme, a farmer can borrow between £2,000 and £50,000, up to a maximum of 25% of total turnover. There are no arrangement fees setting up the loan, no repayments are required for the first 12 months, and no charges if the loan is repaid early.
The loan is unsecured, and banks cannot ask what the money is for or how it will be repaid. Given the scheme is 100% backed by government, there is little risk for the banks.
The loan is for up to six years, with the first repayment due in month 13. The interest rate is fixed at 2.5%.
Repayments
With the fees covered by government, and a fixed rate of interest, our calculations suggest that for a farmer taking out a £50,000 loan under the scheme, the monthly repayments from month 13 onwards should be around £887. So it is a total repayment after six years of approximately £53,220.
On enquiry, the Ulster Bank, Danske Bank and Bank of Ireland (UK) all confirmed this rate of monthly repayments. Some lenders might offer the option of quarterly repayments, so the overall cost would be slightly more.
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