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Coronavirus Bounce Back Loan Scheme

The Bounce Back Loan Scheme (BBLS) enables smaller businesses to access finance more quickly during the coronavirus outbreak.  The scheme is designed to provide quick access to cash to help with business continuity.

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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.

 

The UK Government has announced the Bounce Back Loan Scheme will now be available until 31 March 2021. It also recently confirmed that businesses can apply to ‘top up’ their existing BBLS loan, up to either 25% of their originally stated turnover or the maximum of £50K, whichever is the lower amount.

Please check our other articles on Business Help from UK Government available in our website:

 Corona Virus Job Retention Scheme 

Self-Employment Income Support Scheme (SEISS)

Coronavirus Business Interruption Loan Scheme (CBILS)

 

 

What is Bounce Back Loan Scheme (BBLS)?

The Coronavirus Bounce Back Loan Scheme (BBLS) went live on 4th May 2020.

The scheme was established because the government was concerned many businesses were struggling to secure financing from the Coronavirus Business Interruption Loans (CBILS) announced on 20th March and needed quick access to resources to ensure business continuity. The Chancellor announced on 24th September that the government were extending the payback period for the loans to 10 years (up from the original six years). On 17 December 2020, it was announced that the government was extending the closing date for applying for either a CBILS loan or a Bounce Back Loan to the 30th April 2021 and that businesses who had previously applied for a loan but not taken the full amount could top up their loans.

The Bounce Back Loan scheme is targeted at small and medium-sized UK Businesses who have been negatively affected by the coronavirus pandemic. It is designed to provide quick and efficient access to a business loan of between £2,000 and 25% of their turnover, the maximum loan is £50,000.

The loans may be particularly useful for otherwise viable businesses who do not qualify for the other grants available such as the “Corona Virus Job Retention Scheme”  or the “Self-Employment Income Support Scheme (SEISS)

The Government will guarantee 100% of the loans and there are no fees or interest to pay in the first 12 months, with no repayments due in this period. The government has also agreed with lenders that an affordable flat rate of 2.5% interest will be charged on these loans for the remainder of the loan term after the initial interest-free 12 months.

 

Key features of the scheme

 

Finance of up to £50,000 Guarantee to the lender to encourage them to lend Government pays interest and fees for 12 months Affordable interest rate
Loans range from £2,000 up to 25% of a business’ turnover. The maximum loan amount is £50,000. The scheme provides the lender with a full (100%), government-backed guarantee against the outstanding balance of the finance (both capital and interest). The Government will make a Business Interruption Payment (BIP) to cover the first 12 months of interest payments. The interest rate for the facility is set at 2.5% per annum, meaning businesses will all benefit from the same, affordable rate of interest.
The borrower remains 100% liable for the debt. The borrower does not have to make any repayments for the first 12 months.

 

No guarantee fees for businesses or lenders Security
There is no fee to access the scheme for either businesses or lenders. Lenders are not permitted to take personal guarantees (such as their main home or personal vehicle).

 

 

Eligibility

Your business must be able to self‑declare to the lender that it:

  • has been impacted by the coronavirus pandemic
  • was not a business in difficulty at 31 December 2019
  • engaged in trading or commercial activity in the UK and was established by 1 March 2020
  • not using the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) or the Bank of England’s Covid Corporate Financing Facility Scheme (CCFF), unless the Bounce Back Loan will refinance the whole of the CBILS, CLBILS or CCFF facility
  • not in bankruptcy or liquidation or undergoing debt restructuring at the time it submits its application for finance
  • derives more than 50% of its income from its trading activity
  • is not in a restricted sector (see the British Business Bank website for details of restricted sectors).

Individual lenders may apply further tests.

 

How to apply?

Loans are provided by individual banks who are accredited by the government through the British Business Bank. Businesses must apply online using a seven-question standardised application form.

Guidance on how to apply is provided on the British Business Bank website.

You need to choose a lender from the list on the British Business Bank website. Each lender may have a slightly different application process. You may find it faster to approach your own business bank provider if they are on the list. If you are turned down by a lender. you can apply to another lender on the list.

Supporting documents needed in the application

You’ll need to provide documents that show you can afford to repay the loan. These will vary from lender to lender based on the amount of loan you are seeking. HMRC expects the documents you will need may include:

  • management accounts
  • cash flow forecast
  • business plan
  • historic accounts
  • details of assets.

 

How long is the loan for?

The length of the loan is 10 years, but you can repay early without paying a fee. No repayments will be due during the first 12 months, meaning if you repay in full within 12 months there will be no interest to pay.

 

If the lender turns you down

If one lender turns you down, you can apply to other lenders in the scheme. You may want to consider using a broker to find the right type of finance for your needs, or do your own research using the British Business Bank’s finance guide.

Flexibility to pay back government Bounce Back Loans

Businesses who took out a Bounce Back Loan can access a new Pay as You Grow flexible repayment system, providing flexibility to repay a Bounce Back Loan. This includes extending the length of the loan from six years to 10 years. Interest-only periods of up to six months and payment holidays will also be available to businesses.

 

For more information on BBLS, please give us a call on  +44 01234 712840 and one of our staff members will be happy to assist you.

 

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