Bounce Back Loan Scheme

Banks and other finance providers recognise that the cashflow of small and medium sized businesses may be disrupted by the impact of Covid-19. The banking and finance industry is committed to supporting viable businesses in continuing to trade through these uncertain times. Banks and lenders remain open for business and are well placed to assist all businesses, including sole traders and SMEs, looking for support.

The Bounce Back Loan (BBL) scheme announced by the chancellor is part of the banking and finance industry’s broad package of support for SMEs including capital repayment holidays, overdrafts, working capital extensions and asset-based finance.

The BBL scheme is one of a series of government measures to support businesses which includes Coronavirus Business Interruption Loans, Coronavirus Large Business Interruption Loans and the Covid Corporate Financing Facility. The industry continues to work with government and the British Business Bank to bring support to those SME businesses that were trading successfully before Covid-19 but which may now experience lost or deferred revenues, or disruptions to their cashflow as a result of the current disruption.

Key Features

  • Loans of between £2,000 to £50,000 (up to a maximum of 25 per cent annual turnover)
  • The government covers the first 12 months of interest (this means you pay 0 per cent for the first year)
  • No repayments required for the first 12 months
  • Interest rate of 2.5 per cent
  • 6-year loans with no early repayment charges
  • The government provides a 100 per cent guarantee to the lender

How do I access the Bounce Back Loan Scheme?

Applications for a BBL are based on a short online application form that requires you to certify your eligibility and ability to repay the loan without the need for forward looking financial forecasts.

You can access the online application through an accredited lender’s dedicated Covid-19 support page, which will also provide further information about a Bounce Back Loan.

Who provides Bounce Back Loans? What if my finance provider isn’t accredited for Bounce Back Loans?

Major high street lenders are able to offer BBLs and others are expected to follow shortly.  You can find a current list of lenders that offer BBLs on the British Business Bank website.

You can apply to any accredited provider. However, applications from new customers will take longer to process.

You do not need to contact the British Business Bank to access this scheme.  However, you may find some of the British Business Bank’s information on the scheme useful.

Is my business eligible for a Bounce Back Loan?

To be eligible to apply for the BBL scheme, a business must be:

  • Able to confirm that it has been adversely impacted by the coronavirus (Covid-19).
  • Based in the UK and was carrying on its business on 1 March 2020.
  • Applying to borrow between £2,000 and £50,000 capped at 25% of annual turnover.
  • Able to declare that the business was not insolvent or otherwise a business in difficulty on 31 December 2019. Businesses unable to make this declaration will be asked to complete a form to assess their eligibility under State Aid rules.      

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.

You cannot apply for a new BBL loan if you already have Coronavirus Business Interruption Loan (CBIL) scheme loan.

I have an existing Coronavirus Business Interruption Loan or Overdraft (CBIL) for under £50,000, can I transfer this to a BBL loan?

Any customer with a CBIL scheme loan or overdraft of £50,000 or less will be able to switch that facility to a BBL scheme loan should they wish to do so over the next few months by arrangement with lenders.

What information will I have to provide to apply?

The scheme application form requires general information such as the business name, address, contact details, bank account details and business turnover. The application is based on a series of questions and declarations needed to determine the eligibility of the applicant.    

If the applicant does not have a business current account additional information may be required to verify the applicant is a business.  

Applicants with no existing financial relationship with the lender may need to provide the information commonly needed when opening a new business bank account.   

You can see a checklist list of business current account information requirements here.

How do I evidence my viability?

Businesses self-certify on the application form that they have reviewed and understood the repayments costs associated with the loan and confirm they are able and intend to make timely repayments in future.

Will I have to pay interest on my loan?

The government will make a Business Interruption Payment to your lender to cover the first 12 months of interest payments and any lender-levied charges on your behalf.

After this twelve-month period, interest will be payable at the government-determined rate of 2.5 per cent.

Can I repay my loan early?

Yes. If you borrow under the BBL scheme you will not be subjected to early repayment charges should you choose to repay your financing before its term ends.

You will still be 100 per cent responsible for paying the facility back, as well as interest and fees charged by the lender after the initial ‘interest free’ twelve-month period.

What products can I use through the scheme?

Only loans with a fixed term of six years are available. There are no early repayment fees.

Does it cover all sectors?

The scheme covers most business sectors, with some exceptions.

If a business operates in fisheries or aquaculture, agriculture, or logistics and is an Undertaking in Difficulty, then restrictions apply.

For businesses active in fisheries and aquaculture, Bounce Back Loans are not available for the activities listed in Article 1, Paragraph 1 of European Commission Regulation 717/2014.

European Commission Regulation 717/2014 

Will the amount of money available for Bounce Back Loans run out?

The government has indicated that there is no maximum cap set for total lending to be supported through the BBL scheme – it will be demand led. Therefore, there is no immediate need to approach lenders if you do not need finance in the short-term.

Is the BBL scheme a loan or a grant?

The scheme is not a grant. The scheme provides a guarantee to a lender to allow them to provide finance, but businesses will still have to repay this loan or facility.

The government has announced support measures for businesses such as grants which businesses may be eligible for. Further information on these initiatives is available here.

Will I have to provide a personal guarantee or security to take out a Bounce Back Loan?

No.

Can I use a BBL to refinance existing borrowing?

Yes. There is no restriction on the total amount of scheme facilities that may consist of refinancing.

I was declined a CBIL scheme loan, is there any point applying for a BBL?

If you were declined a CBIL facility, it may be possible you are eligible for a BBL so you may wish to apply for one.

However, BBL scheme eligibility is different to CBILS and you should factor that into your decision to apply.

I have applied for a CBIL loan under £50,000 but I am waiting for a response, what should I do?

You may withdraw the application and apply for a BBL. It is not possible to apply for a CBIL loan or overdraft under £50,000 from 4th May 2020.

Will the interest rate vary by bank?  Who has set the interest rate?

The interest rate on the BBL loan is set by the government and will offered by on all BBL loans provided by accredited lenders. This rate is not controlled or set by lenders. The interest rate payable after 12 months is 2.5 per cent per annum.

How long must I have been trading for?

Your business must have been established by 1st March 2020. The length of your business’ trading history is not an eligibility requirement

Is turnover net or gross of VAT?

Turnover is as reported in financial accounts or tax returns. 

Will taking out a BBL loan impact my credit rating?

The lender may register your Bounce Back Loan with credit reference agencies, and credit ratings may be affected by any failure or delay in repaying.

COVID-19

As the situation with Covid-19 in the UK evolves rapidly many consumers and businesses have questions about how the banking and finance industry will be able to support them to access the finances, support and guidance they need.

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