COVID-19 has affected millions of people across the globe in so many ways. From shopping in supermarkets to social distanced chats with relatives, life as we know it has been put on hold and nowhere has this been felt more than by business owners. When the country went into lockdown back in March, many business owners had to shut up shop or find new ways of working that abided by social distancing rules.
And it’s no secret that lockdown, despite being necessary, has had a huge financial impact on businesses and the country as a whole. In a bid to support those who have been most affected, the government introduced new financial schemes to help furlough staff and support businesses who have had to close. One of these schemes was the bounce back business loan and if you’re lucky enough to be eligible to receive this financial support, it’s important to make the most of it.
In this guide, we’re going to take a look at what the bounce back loan actually is and six smart ways you can use these funds to support your business right now. Even if you’re still closed.
What is a bounce back business loan and who can apply?
The bounce back loan has been designed to offer some financial relief to small and medium sized businesses across the UK. Owners can borrow between £2,000 and up to 25% of their annual turnover. However, the loan is capped at £50,000. Applicants will receive 100% of the money they’re entitled to and they won’t have to pay any interest for the first 12 months. After the first year, the interest rate is set at 2.5%.
You are eligible for a bounce back loan if you are based in the UK and your business was firmly established before 1st March 2020. Your business must also have been adversely impacted by COVID-19. If your business is still able to function perfectly despite the virus, you may not be entitled to the loan.
So if you are eligible and you’ve been accepted for the loan, you should try and make the most out of this during these difficult times. Below we’ve put together six suggestions for smart ways you can use this money right now.
You might wish to spend your loan on updating your inventory. This could be your chance to replenish stock, get more seasonal products and perhaps even try a new range of products. Then, when the time comes to reopen your business (or perhaps you’re still able to sell online), you’ll have a much bigger range of products to offer to your customers. This can help you to quickly boost sales and get your business back on track.
There may be something you’ve needed for a while, perhaps a new vehicle, new machinery or new equipment that can broaden your capability as a company. While your other daily business costs are low and you’ve been granted a lump sum of cash, now could be the perfect time to invest in this new equipment or machinery.
3. Refinancing to pay off other expenses
If you’ve got a number of other small loans you’ve taken out or you’ve hired equipment on finance, now could be the perfect time to pay off your other expenses and consolidate everything into this one loan. For example, if you’ve got a small loan you took out to start up your business and you’re also making monthly payments on a car, why not pay all of this off and then you’ll only be left with one monthly repayment on your bounce back loan. And better still, you wont be charged interest on this for the first 12 months! So financially this could be a very beneficial move for your business.
In a time where you may not be able to run your business as normal, perhaps you’re relying on online sales or simply waiting until you can open back up again, why not turn your attention to your marketing and promoting your business. That way, when the time comes to reopen you might find you get an influx of new customers.
It’s important to invest in marketing efforts that are going to generate sales in the future. So this could mean investing in a new website, paying someone to create content for you and start building your SEO or perhaps you could put some money into Pay Per Click advertising. Although it might feel like a larger investment right now, online marketing can really pay off in the future and help to drive large numbers of customers to your business.
5. Every day business expenses
One way that many businesses might find best to use their loans is to keep their business afloat by covering the every day expenses. For example, rent on your offices or shopfront. You might also find you can use your loan to keep staff onboard so you don’t have to let them go and try to re-hire when the business is able to open back up again. The government has also set up a furlough scheme for those who can’t afford to pay their staff, but if you’re not eligible or you run a smaller workforce, you might be able to use your bounce back loan instead.
6. Staff training
You could also use your bounce back loan to invest in yourself and your staff through training. This can be particularly beneficial if your business is closed and you and your workforce have a lot more free time on your hands – you can make the most of this opportunity!
It’s unlikely you’ll be able to run group training sessions because of social distancing rules, but you could invest some of your loan into online training courses and paying for certain employees to gain new qualifications. Ultimately, it is your business that is going to benefit when everyone returns to work and you have a highly skilled workforce ready to help your business get back up and running.