Bounce Back Loans – Handle with care!

Coronavirus, Finance, Planning,

Bounce Back Loans have been the saving of many small businesses over the last few weeks. They are super-easy to apply for, in most cases have dropped into bank accounts within a few days and there have been few businesses whose application has been declined.

So what’s the problem with them?

In the right hands, Bounce Back loans will prove to be the survival mechanism they were intended to be.

If you don’t have a clear, well thought through plan for how to use them though, they could just become another burden to carry through the coming months.

Back at the end of February, many businesses had no intention of borrowing in the next 12 months. Faced with closing their doors for a prolonged period and comparatively easy access to up to £50,000, many business owners have, rightly, jumped at the chance to change tack and take the cash.

Those same business now need to think carefully about how best to use the lump sum they’re now sitting on.

  • Where can you make the best use of that cash?
  • Where will it give you the best return?
  • Can you use it to reduce the cost of your current borrowings, reducing pressure on you every single month?
  • Could it help you pivot your business to move forwards in a changed environment?

Investing in a new solution to increase sales, or to enable you to launch a new product may well be the best way to go, but equally, strengthening the foundation of your business may be far more pressing.

Investing to gain a huge step up in sales volume might be helpful, but would it make sense to pay off existing, expensive debt first?

The best way to use your Bounce Back loan will depend on the following:

  • Your financial position before Coronavirus.
  • How dramatic the impact of Coronavirus has been on your business.
  • When and how you anticipate getting back to a semblance of ‘normal’ in your business.
  • Whether your post-CPVID updated budgets and forecasts predict that it’s likely you’ll be able to easily start repaying your Loan out of profits when the repayments kick in after 12 months.

Before you make any big decisions about investing your Bounce Back Loan, think carefully about how it can make the most dramatic, positive impact on your business. So many small businesses are hugely under capitalised, this could be a golden opportunity to solve that problem.

Just make sure you don’t look back in 12 months and regret what you used it for!

We’re very happy to discuss different scenarios with you, or to review your forecasts or budgets if it would be helpful before you commit your funds. As ever, please get in touch if you’re like to chat!

 

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