The Bounce Back Loan Scheme – What is it and how to apply?

By May 4, 2020 May 12th, 2020 Insights
Bounce Back Loan

The coronavirus pandemic is going to hit many small businesses hard, which is why the Government has been looking at ways to help keep businesses working throughout and after the crisis is over. At the end of April, Chancellor Rishi Sunak unveiled a new loan scheme called the Bounce Back Loan Scheme. The 100% government-backed scheme will provide loans to small businesses, aiming to offer some relief during these tough times.

What is the new small business loan scheme?

The Bounce Back Loan Scheme is a government-backed loan scheme that will enable small businesses to borrow between £2,000 and £50,000. The available loan for each business is determined by the annual turnover. Each business is eligible to apply for a loan that is up to 25% of their annual turnover.

Similar to the Coronavirus Business Interruption Loan Scheme (CBILS), the Government will pay the interest for the first 12 months. Loan terms will be available for up to six years and the loans are provided through a network of accredited lenders. Full list of accredited lenders and partners is available on the British Business Bank website.

The Government has said that “it will work with lenders to agree a low rate of interest” for the loans and according to the British Business Bank website, the interest rate is set at 2.5% per annum. Lenders are not allowed to take personal guarantees or take recovery action over your personal assets, such as your main home.

Fees, such as early repayment, are not permitted and there is no access fee to the scheme, for either businesses or lenders.

The Chancellor has said the purpose of the new loan scheme is to ensure small businesses receive vital cash injections fast and without a complicated loan application process.

Who is eligible to use the Bounce Back Loan Scheme?

The Government has designed the new loan scheme in a way that should result in faster application times. The Bounce Back Loan Scheme doesn’t have complex eligibility criteria – the loan is available to your business if:

  • Your business is based in the UK
  • Your business was trading on 1 March 2020
  • Your business has been negatively affected by COVID-19
  • Your business was not in difficulty on 31 December 2019

The loan scheme is not available to banks, insurers, reinsurers, public-sector bodies or state-funded primary and secondary schools.

You should also note that if you are already claiming the CBILS, then you cannot claim through the Bounce Back Loan Scheme. However, it is possible to talk to your lender about transferring your CBILS loan under the Bounce Back Loan Scheme if your loan is less than £50,000. Contact your current loan provider to ask about this possibility and what it would mean for your loan.

When and how to apply for the new small business loan?

Your business can apply for the Bounce Back Loan Scheme online through a simple form that will ask for details such as your annual turnover, bank account number and how your business has been adversely affected by the coronavirus. The scheme has been available since 4 May 2020.

The Government has said it hopes the money is available to businesses within 24 hours of application but banks have said application times might be longer. Banks’ slow processing times of the new loan schemes have been under scrutiny and CBI Director-General Dame Carolyn Fairbairn put more pressure on banks when welcoming the new loan scheme by stating, “Banks now need to continue their work in overdrive to get the loans flowing faster”.

Banks’ ability to respond and process the new loan applications will play a crucial part when judging the scheme’s ultimate success. According to the BBC, Barclays received 200 applications within the first minute of the Bounce Back Loan Scheme going live. This shows there is a huge appetite for the scheme but also how much pressure there will be on banks to deliver loan decisions on time.

What are the other tools available to small businesses?

Small businesses should find the Bounce Back Loan Scheme a straightforward and fast process to help at these trying times. But other tools and schemes are available to use if your business is struggling.

We’ve created a handful of guides to help you understand these tools and schemes and to make use of them. Below are links to resources on:

The Government has been publishing amendments and new schemes throughout the spring and more schemes are likely in the pipeline. We will keep you posted on any developments that could have an impact on your small business.

Get more small business advice

Having an injection of cash into your small business could help your business get through the initial hurdles. But the journey to recovery might be long and it is important to stay ahead of the different Government schemes. You are not alone in dealing with the crisis and there is help available for your business.

At Devonshire Green, our experts will provide your small business with advice on how to navigate the current situation and secure your finances for the future. If you have any questions, contact us today and let’s solve them together.