COVID-19: New Bounce Back loan for small businesses
Apr 30, 2020
PAGE UPDATED: 06/05/20
The Government has announced a new 100% government-backed loan scheme for small businesses which has been available from Monday 4 May.
This Bounce Back Loan scheme helps small businesses affected by Covid-19 to apply for loans of up to £50,000. It’s designed to offer a fast-track route to accessing additional finance, and comes with a 100% government-backed guarantee for lenders.
It comes after the existing Coronavirus Business Interruption Loan Scheme (CBILS) has been widely criticised for the slow processing of loan applications, and for a delay in banks distributing funds.
The Chancellor Rishi Sunak confirmed that this new Bounce Back Loans scheme is much simpler to apply for. Businesses need to complete a short, standardised online application form, and they receive the loans within 24 hours of approval. Sunak assured businesses that,
“There will be no forward-looking tests of business viability; no complex eligibility criteria; just a simple, quick, standard form for businesses to fill in”.
More than 69,000 Bounce Back Loans worth over £2bn were approved during the first 24 hours, with the main banks all reporting tens of thousands of applications and an average loan value of £30,000, many paid out within a matter of hours.
How the loan works
- Businesses can borrow between £2,000 and £50,000, capped at 25% of turnover
- Loans will be interest free for the first 12 months, and businesses can apply online through a short and simple form
- After the first 12 months the interest rate is set at 2.5%
- Loan terms will be up to 6 years
- No repayments will be due during the first 12 months
- Businesses remain 100% liable to repay the full loan amount, as well as interest, after the first year
The scheme launched for applications on Monday 4 May. Businesses can access the loans through a network of accredited lenders. The government will work with lenders to ensure loans delivered through this scheme are advanced as quickly as possible, and will agree a low standardised level of interest for the remaining period of the loan.
What you need to do
- Find an accredited lender on the British Business Bank website
- Approach them, ideally via their website
- Complete a short application form which self certifies that your business is eligible for a loan under BBLS
- If eligible you will need to complete the Banks Anti-Money laundering, fraud and Know Your Client checks
- The lender makes a decision
You can apply for a loan if your business:
- has been impacted by the coronavirus (COVID-19) pandemic
- was not a business in difficulty at 31 December 2019
- is engaged in trading or commercial activity in the UK and was established by 1 March 2020
- is not using the Coronavirus Business Interruption Loan Scheme (CBILS). If you have already applied for a CBILS loan of £50,000 or less, you have until 4 November 2020 to apply for it to be switched over to the Bounce Back Loan.
- is not in bankruptcy or liquidation, or undergoing debt restructuring at the time you submit your application for finance
- derives more than 50% of its income from its trading activity (this requirement does not apply to charities or further-education colleges)
Note: The above is not an exhaustive list – see The British Business Bank for more information.
Who cannot apply
The following businesses are not eligible to apply:
- banks, insurers and reinsurers (but not insurance brokers)
- public-sector bodies
- further-education establishments if they are grant-funded
- state-funded primary and secondary schools
- if you have an existing loan
The British Business Bank has released an FAQs document for small businesses. If you’re considering applying for the Bounce Back loan and have any queries or concerns please get in touch with us and we’ll be happy to help.