Today (4 May 2020), the UK Government announce the details of its latest finance scheme to help British businesses through and out the other side of the Covid-19 lockdown – the Bounce Back Loans Scheme (BBLS). The question is, will this work for small creative and cultural businesses?
Following blog by Sarah Thirtle, Director of Business Support Programmes, Creative United.
We had heard from many creative businesses up and down the country that the first loan package offered by the Government, the Coronavirus Business Interruption Loans Scheme (CBILS), was simply not right for them. Lenders needed too much in terms of documentation; they wouldn’t lend to creative or hospitality businesses (venues); personal guarantees were required (ramping up the sense of risk for the individual); the repayment terms seemed too onerous (even with the Government being liable for 80% of the loan should the borrower be unable to repay); and for many creative businesses, they simply didn’t need finance in the hundreds of thousands of pounds.
Calls from both within and outside of the creative sector asked for loans to be 100% Government-backed. With the announcement of the Bounce Back Loan Scheme, there is now a loan fund which is 100% Government-backed, with a fixed low interest rate of 2.5% and nothing to repay in the first 12 months. Even any loan fees would be covered by the Government. Amounts available start from as low as £2,000, with a maximum of £50,000 or 25% of turnover.
In all the years that Creative United has been working to enable more creative businesses to access loan finance, we have never seen a scheme with this range of mechanisms included to make it as affordable as possible.
Yes, it’s a loan, so creative businesses will need to consider how they will repay this. When coming out of lockdown, will your business have an achievable, manageable cashflow? Is there a marketing plan, order book or set of customers ready to go? Can you get tickets on sale and connect with your audience? It will of course take more than finance to see our sector through one of the toughest economic climates in history, but it will help. If there is another loan facility that is more suited to risk-averse and cautious creative businesses, then we’ve not seen it.
As yet, we don’t know what the application process will be like to go through as it’s just been launched. We are also hearing that lenders are prioritising businesses that already bank with them, which could mean many will experience a major barrier to entry. However, looking through the eligibility criteria, it certainly seems like many creative and cultural businesses – high street galleries, music venues, music retailers, independent museums, designer-makers – would be eligible for the Bounce Back Loans
Information about eligibility and how to apply can be found on the British Business Bank website here.
Key things to note are:
- Your business cannot have been in difficulty by 31 December 2019
- It was engaged in trading activity (with more than 50% of income from this activity) and was established by 1 March 2020
- You’re not already using one of the other Coronavirus loan schemes
If you’re going through the Bounce Back Loan Scheme, do let us know your thoughts on the application process, and whether you were successful. It would be great to share your experience with other creative and cultural businesses.