Bounce Back Loan and Dairy Hardship Fund – Are these the answer to your short term cashflow problem?

By Andrew Suddes

On May 4th, the government announced its latest measures (Bounce Back Loan) to tackle the economic damage done by the COVID-19 Pandemic. On May 6th the Dairy Hardship Fund was unveiled.

You have gone from no hope of financial support to being spoilt for choice. Yet, do these provide the light at the end of the tunnel for your business?

Dairy Hardship Fund

To deal with the Hardship Fund first, this is for specifically English dairy farmers who have suffered a minimum loss of 25% in income in April and May. Primarily, due to the complete loss of demand.

Benefiting those of you who have been worst affected. Acting as a financial bridge to make up the losses occurred from dumped milk or accepted deferred payments on your contracts. You can apply for a flat-rate payment of £10,000, more details are available here.

Bounce Back Loan

On hearing about the new government bounce back loan scheme I contacted a few clients who I thought might be interested. We discussed the scheme details and how they could put the money to good use. The discussions took place at lunchtime by the evening, both businesses were in receipt of facility letters from their banks. As my client put it, “…the easiest £50,000 I have ever asked for”.

The Bounce Back Loan is self-certified and requires several questions to be answered (lender dependent) before funds are released.

Any business can apply for a loan of 25% of their annual turnover up to a maximum of £50,000. Any application for this loan would prohibit your business from applying for a separate facility under the alternative Coronavirus Business Interrupting Loan Scheme (CBILS).

You must watch out for some obvious pitfalls. Feedback from banking contacts suggests that they our uncomfortable with unviable businesses accessing the funds, from the very relaxed credit process.

The system appears to be vulnerable to abuse from fraudsters and businesses with a patchy credit history. If you are going to apply for these funds, you do not even have to check in with your manager. It is the Writer’s opinion that not doing so represents “bad form” and it would appear to be courteous to at least hold this discussion prior to making a final decision.

Final decisions

It is rarely good advice for a business that is struggling and has structural problems to borrow more money. However, there are plenty of farm businesses out there now who are otherwise viable but experiencing serious cash flow difficulties due to the market ructions caused by the coronavirus pandemic.

These businesses would do well to take advantage of both schemes outlined and put the money to good use some examples of this may be:

  • Payment of pressing creditors such as feed suppliers
  • Reduction of debt to reduce monthly outgoings
  • Investment in the fabric of the farm to generate a short-term return

It is easy to get carried away imagining how to spend this money but in truth it is designed to help you manage your short-term cash flow difficulties. You must repay the Bounce Back Loan with the terms of this scheme stating that after a twelve-month repayment holiday the full amount must be repaid over a five-year term either on a regular (e.g. monthly or quarterly) basis or via lump sum repayments. To apply, go to your own Bank’s website which will guide you through the application process.

We advise anyone in this situation requiring this loan, that the future of your business is viable to ensure repayments will be made. For more details on the Bounce Back Loan click here.

We will update you with more information on the Dairy Hardship Fund when it is available. In the meantime, sit back, keep farming, and sleep a little easier knowing you do have options. If you have any questions or need some timely financial advice please give us a call.