The Bounce Back Loan Scheme (BBLS) has been designed to support small and medium-sized businesses who have been affected by the Coronavirus pandemic. The government guarantees 100% of the loan.

Recognising the need for small businesses and sole traders to receive more support in dealing with the coronavirus outbreak, the Government has launched the Bounce Back Loans scheme. Small companies, including High Street outfits such as florists, coffee shops and hairdressers, are eligible to borrow between £2,000 and up to 25% of their turnover with a cap at £50,000.

The money will be made available within a matter of days. Lenders have been informed the loans are backed 100% by the Government, offering confidence to them, which will hopefully make it easier for small businesses and sole traders to access this support.

The application process is carried out online, and applicants must complete a short and simple form. The form contains seven questions, and businesses can apply for the loan as long as:

  1. They are based in the UK
  2. They have been negatively affected by Coronavirus
  3. Were operating on 1st March 2020

What are the key benefits of the Bounce Back Loan Scheme?

There are 3 main benefits for applying to this scheme, including:

  • The Government will provide a 100% guarantee to help small and medium-sized businesses quickly access the cash that they need to get the funding that they require.
  • The access to cash will help to keep businesses operating
  • It’s a form of financial support through the short-term uncertainty due to COVID-19

Rate of interest

Lenders have agreed with the Government that a flat rate of 2.5% interest per year will be charged on the loan. Any business that has already arranged for a coronavirus business interruption loan up to and including £50,000 can apply to switch the loan over the Bounce Back Loans scheme.

What is the Government saying about the Bounce Back Loan scheme?

The Government has committed a range of measures aimed at supporting people and businesses through this challenging time. Over £7 billion has been awarded in business grants, seven million+ jobs have been backed through the job retention scheme, and tax deferrals have assisted hundreds of thousands of companies.

The Chancellor of the Exchequer, Rishi Sunak, said; “Small businesses will play a key role creating jobs and securing economic growth as we recover from the Coronavirus pandemic. The Bounce Back loan scheme will make sure they get the finance they need – helping them bounce back and protect jobs.”

Business Secretary Alok Sharma said; “We are backing small businesses, which are the backbone of our communities, with the support they need to stay afloat. This new scheme of 100% government-guaranteed loans gives owners of even the smallest businesses the confidence and flexibility to borrow a sum which works for them. This will help ensure they can continue to trade, and be a key part of our efforts to reboot the British economy.”

Apply for a bounce back loan

To apply for the Bounce Back Loan scheme, a company must meet specific criteria, which includes:

  • Being based in the United Kingdom
  • Being established before 1 March 2020
  • Being adversely affected by the coronavirus

Any business which was classed as a “business in difficulty” on 31 December 2019 will need to confirm they are complying with additional state aid restrictions.

While businesses from the vast majority of sectors can apply, the following restrictions are in place:

  • Banks, insurers and reinsurers cannot apply (although insurance brokers are eligible)
  • Public-sector bodies
  • State-funded primary and secondary schools

There are also restrictions in place for companies who are already claiming support. A firm cannot apply if they are already claiming funds under the:

  • Coronavirus Business Interruption Loan Scheme (CBILS)
  • Coronavirus Large Business Interruption Loan Scheme (CLBILS)
  • COVID-19 Corporate Financing Facility

However, any organisation who has already received a loan of up to and including £50,000 under one of these schemes has the right to transfer this loan to the Bounce Back Loan scheme. This must be arranged with your lender before 4 November 2020.

How long is the loan for?

The length of the loan is set at six years, but it is possible to repay the loan early without facing a fee for doing so. There will be no repayments due within the first 12 months of having received a loan.

How to apply for the loan

11 lenders are participating in the Bounce Back Loan scheme, and this includes many retail banks. Please review your range of options, and approach a suitable lender by visiting the lender’s website.

You will be required to complete a short online application form, and you will have to self-declare you are eligible for the funding.

The lender will then determine if they will offer you a loan or offer you a different type of finance. You will be responsible for repaying the full amount of money you have borrowed.

If a lender refuses your application, you are eligible to apply to a separate lender who is participating in the scheme.

You are free to carry out your own research into the lenders, with the British Business Bank finance guide being a relevant resource. You can also utilise the help of a broker to determine the type of finance which is most appropriate for your needs.

Bounce back loan scheme

The scheme has been designed to offer a fast solution for firms to arrange funds while ensuring lenders have confidence in providing funds.

Key features of the scheme include:

While finance is available up to £50,000, the money available to a firm will depend on their annual turnover. The loans are available from £2,000 and up to 25% of the business’ turnover, up to the maximum loan amount of £50,000.

As the scheme is provided with a full (100%) Government-backed guarantee against any outstanding balance of the finance, which includes the capital and interest element, there is an assurance for the lender. The extent of the Government backing of this scheme will hopefully provide lenders with the confidence they need to support as many applications as they deem viable. The borrower will remain 100% liable for any debt they hold.

The Government has also committed to making a Business Interruption Payment (BIP), which will cover the initial 12 months of interest payments.

The affordable rate of interest, 2.5% per annum, is another key feature of the scheme. This should ensure all businesses, from all sectors, can benefit.             

Any eligible firm will be subjected to:

Appropriate customer fraud checks

Anti-Money Laundering (AML) checks

Know Your Customer (KYC) checks

There may also be state aid restrictions applied to individual cases.

The lender is not permitted to take any form or personal guarantee, nor can the lender take recovery action on the personal assets of a borrower, including a home or vehicle.

Get in touch with The Money Hub today

The Money Hub are here for you during these uncertain times. We hope that you found this guide to Bounce Back Loans helpful. Don’t forget that we are still here to help with a whole range of different mortgage queries, including bad credit mortgages, buy to let mortgages and remortgages. For more information, please get in touch and we will be able to assist you.

DISCLAIMER: These articles are for information only and should not be construed as advice. You should always seek advice prior to taking any action.