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Bounce Back Loans could be a big help to the third sector

Third sector organisations in Cumbria are being invited to consider the Government’s Bounce Back Loan Scheme (BBLS) as a potential source of finance to help with their cash flow as the COVID-19 outbreak continues and winter approaches.

Third sector organisations – such as charities, voluntary and community organisations, social enterprises and cooperatives – like many facets of the Cumbrian economy have seen their finances hit hard as a result of the pandemic.

Now, voluntary and community sector leaders on the Business and Economic Response and Recovery Group (BERRG), which is responsible for developing the county’s business and economic response to COVID-19, are suggesting that the Bounce Back Loan Scheme, launched by the Government in May and recently extended, could be a key source of help.

The scheme, which provides small and medium-sized businesses with borrowings between £2,000 and £50,000 or up to 25% of turnover, was due to close on November 4, and then November 30. However, the Chancellor of the Exchequer Rishi Sunak announced recently that it would be extended until January 31.

Jo Lappin, Chair of BERRG, part of the Local Resilience Forum structure, said: “The COVID-19 outbreak continues to put unprecedented challenges in the way of Cumbrian businesses and it is important that all of our businesses, including our third sector colleagues are aware of the support available. BERRG has strong third sector representatives with two of our Board members, Lorrainne Smyth and Sarah Swindley, making sure that the views of the sector are heard and understood”.

Sarah Swindley, Chief Executive of the Lake District Foundation, said: “Our third sector organisations are not immune from the wide range of difficulties encountered elsewhere. One big advantage of the BBLS is that no guarantees are required. In mainstream lending, banks will usually only lend to those organisations where personal guarantees are available.

“However, as most directors/trustees of third sector organisations are usually volunteers, no individual will give the bank a personal guarantee. The BBLS, being personal guarantee exempt, offers an excellent window of opportunity for third sector organisations to lever in capital under borrowing terms that they would not usually be able to obtain.”

Lorrainne Smyth, Chief Executive of Action With Communities in Cumbria, added: “Clearly, any third sector organisation needs to think very carefully before taking on a loan and be confident that they can manage the repayments once these become due after a year.

“This has been a very difficult period for the sector and if organisations are facing cash flow challenges in the short to medium term BBLS might be one option to help address this while revenue streams recover. The guarantee coupled with no payments for 12 months might provide the right support for some businesses.”

The government guarantees 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. After 12 months the interest rate will be 2.5% a year.

Organisations can apply for a loan if they:

  • are based in the UK;
  • were established before March 1, 2020;
  • have been adversely impacted by the coronavirus.

Full details of the Bounce Back Loan scheme can be found here:

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