Protecting Your Bounce Back Loan
Over the last couple of months, you may have, like many companies, taken advantage of the government Bounce Back loan schemes that have been introduced to help businesses survive the difficult circumstances they currently face.
Small to medium sized business have been able to borrow up to 25% of their turnover (between £2,000 up to a maximum of £50,000) over a 6-year term on the loan scheme.
A Vital Lifeline
This scheme has been a vital lifeline for a number of businesses, helping to resolve any short-term cashflow concerns and offer support through unsettled trading conditions. Helped again with the government paying the first 12 months interest payment.
While the loans are being backed by the government, it is important to remember that the scheme is a loan and not a grant. This means that your business is responsible for repayment of the loan, and if you are a sole trader, you are personally liable for the loan.
Safeguarding Your Business
With that in mind, it makes sense to put a protection policy in place. This policy would cover the Bounce Back loan against the loss of a key earner or key person who, if lost, would impact the finances of the business.
A key person might be the owner, a partner or you! And, when that person is out of action, it affects profit, revenue and even the ability to gain new customers.
What Is Key Person Insurance?
With a Key Person insurance policy, the company will receive a pay out if the key person passes away or is diagnosed with a critical illness (if chosen), providing the finances to pay back the Bounce Back Loan.
How affordable are the policies?
Putting in place a Key Person policy to cover your Bounce Back Loan can be very affordable, due to the sum assured (maximum £50,000) and the term of the loans being just 6 years. The premium is dependent on a few factors, such as the key person’s age, health, and occupation. For some, this maybe as a little as a £10-15 a month.
As with other types of business protection policies, there are tax-deductible components that may qualify for corporate tax relief.
If you have taken advantage of the Bounce Back Loan Scheme and are contemplating protecting the loan, it is always best to seek professional advice when it comes to insurance. The team at Covertree can help you identify the key people and their financial impact and can advise on how affordable a Key Person insurance plan can be.