Government backed Bounce Back Loans scheme – update 4th May

27th April 2020

The Bounce Back Loan scheme for small firms has now launched giving them access to 100% taxpayer-backed loans after they raised concerns about slow access to existing coronavirus rescue schemes.

Chancellor Rishi Sunak announced on the 27th April that the Bounce Back Loan scheme would offer small businesses loans of up to £50,000 within days of applying. It aims to unlock a backlog of credit checks by banks amid fears many small firms could fold before getting loans.

• businesses will be able to borrow between £2,000 and £50,000 and access the cash within days
• businesses can apply online through a short and simple form
• loan terms will be up to 6 years
• no fees or interest to pay for the first 12 months
• no loan repayments will be due during the first 12 months
• the government will provide lenders with a 100% guarantee for the loan

The scheme requires filling in a two-page self-certification form online. The loan terms mean that no capital or interest repayments will be due for one year. Instead, the government will pay the interest for the first 12 months.

Banks have come under fire for delays in handing out loans, but have blamed the heavy workload, need to complete the necessary credit checks and a shortage of staff. Underwriting the loans removes the risk that banks will not get their money back which is hoped will speed up the application process.

Eligibility

The Bounce Back Loans scheme is capped at 25 per cent of turnover.

The Scheme is open to most businesses, regardless of turnover, who meet the eligibility criteria and who were established on or before 1 March 2020.

You can apply for a loan if your business:

• is based in the UK
• has been negatively affected by coronavirus
• was not an ‘undertaking in difficulty’ on 31 December 2019
• at the time of submitting their loan application, the business is neither in bankruptcy, debt restructuring proceedings, liquidation or similar.
• that more than 50% of the income of the business (together with that of any member of any group of which it is a part) is derived from its trading activity.
• that you will use the loan only to provide economic benefit to the business, and not for personal purposes.

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

Interaction with Coronavirus Business Interuption Loan Schene (CBILS)

You cannot apply if you’re already claiming under the CBILS.

If you’ve already received a loan of up to £50,000 under CBILS and would like to transfer it into the Bounce Back Loan scheme, you can arrange this with your lender until 4 November 2020.

How to apply

The Bounce Back Loan scheme launched on the 4 May 2020.

As with the Coronavirus Business Interruption Loan Scheme, the British Business Bank will administer the Bounce Bank Loans, which will be offered by the 50 plus banks currently taking part in CBILS.

The Scheme will be available through the British Business Bank’s accredited lenders. A list of lenders is available here.

The loans will be easy to apply for through a short, standardised online application. The loan should reach businesses within days.

Full details of the government announcement can be found at: https://www.gov.uk/government/news/small-businesses-boosted-by-bounce-back-loans

Details on how to apply are at: https://www.gov.uk/guidance/apply-for-a-coronavirus-bounce-back-loan

 

We will keep you updated if any further information is published.

We are here to help our clients during this challenging time and are regularly updating our latest news feed, business support fact sheets and useful links. These are now all accessible in one place at our Coronavirus Updates resource page.