Coronavirus has caused disruption for many business owners, leaving them struggling with finance and cash flow issues.
The Coronavirus Business Interruption Loan Scheme (CBILS) has had an extremely low acceptance rate and due to the banks carrying a 20% risk of loss on non payment, they have been extremely risk averse and left a lot of businesses unsupported. On 27 April, the Chancellor, Rishi Sunak announced the new Bounce Back Loan Scheme (BBLS) that would help those businesses.
What is a Bounce Back Loan?
The scheme went live on 4 May 2020 and is aimed at small and micro businesses. It offers 100% Government guaranteed loans of between £2,000 and £50,000 (up to a maximum of 25% of a business’ annual turnover), with no repayments, interest or fees payable for the first 12 months. The loans have terms of up to six years and boast fast application times to help make funds available as soon as possible. Chancellor Rishi Sunak has announced that these loans will be offered with a fixed, low interest rate of 2.5% per year.
What does 100% guaranteed by the Government mean?
This loan is 100% guaranteed by the Government, but it’s important to understand exactly what that means. The Government is guaranteeing 100% of losses to the lender, while the borrower remains fully liable for paying back what they owe. The reason for doing this is that it encourages lenders to make funds available to businesses in need, without taking on the risk of doing so.
The Bounce Back Loan is not a grant – meaning as the borrower, you will have to pack back the funds you receive plus any interest accrued.
How do I apply?
Applications can be made through accredited lenders’ websites and have been designed to be quick and easy, with minimal paperwork included.
Click the links below to navigate to each bank’s application form, or click here for a full list of accredited providers.
Bank of Scotland
Barclays
Clydesdale Bank
Danske Bank
HSBC
Lloyds Bank
NatWest
Royal Bank of Scotland
Santander Ulster Bank
Yorkshire Bank
The Bounce Back Loan – FAQs
How much can I get?
Small businesses will be able to receive a loan of between £2,000 – £50,000, limited to 1/4 of their annual turnover.
Am I eligible for this scheme?
In order to apply for a loan your business must:
- be based in the UK
- have been negatively affected by coronavirus
- not been in difficulty on 31 December 2019
- have been established by 1 March 2020
- derive more than 50% of its income from its trading activity
Some businesses are not eligible for the scheme, these include:
- banks, insurers and reinsurers (insurance brokers are eligible)
- public-sector bodies
- state-funded primary and secondary schools
How much interest will I have to pay?
Rishi Sunak has announced that accredited lenders will be able to offer Bounce Back Loans at a fixed rate of 2.5% per year. This low rate has been set to give small businesses the capital they need at an affordable price.
How long will the loan last?
Loan terms will be up to six years, but you will not be charged any early repayment fees if you choose to settle up before the end of you loan term. No repayments, fees or interest will be due for the first 12 months.
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