Bounce Back Loan Scheme: A loan by the government to boost small businesses affected by COVID-19

Small and medium-sized businesses hit by COVID-19 and who cannot access ordinary bank loan or other government led programme are able to benefit from a new fast-track finance scheme (BBLS). The funding is provided by way of a cash loan with a 100% government-backed guarantee for up to £50,000 to help them survive the corona virus pandemic.

Around 110,000 small businesses applied for BBLS in the hours after it launched yesterday. With banks reporting an average loan of about £30,000, the support is calculated to have hit £3.3bn on day one.

BBLS comes after several other schemes providing assistance to businesses by way of loan including the Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS). BBLS will run alongside those schemes and will help bolster the existing package of support available to the smallest businesses.

The UK government has teamed up with accredited lenders to deliver BBLS. This 100% government-backed loan follows calls by businesses for the government to raise its CBILS guarantee from 80% to 100% in order to accelerate the delivery of the funding.

The banking sector has concerns particularly due to the absence of legislation backing BBLS and the insufficiency in digital banking systems to provide loans within days. Furthermore, they have pointed out that a result of such a simplified process is that a bank will not be able to undertake adequate due diligence on borrowers and therefore the scheme is open to fraud and/or abuse.

Basic terms of BBLS are:

• Businesses will be able to borrow between £2,000 and £50,000 up to 25% of their turnover;
• Loans will be interest free for the first 12 months of the loan;
• No repayments will be required the first 12 months; and
• Loan Term of up to 6 years at an interest rate fixed of 2.5% with the government meeting the interest in year 1.

Eligibility and how to apply:

Any business can apply for a micro business loan, provided:

  • They are UK-based and established by March 1 2020
  • Have been adversely impacted by the Coronavirus
  •  Are currently not using a government-backed Coronavirus loan scheme (unless using BBLS to refinance a whole facility)
  • Not in bankruptcy, liquidation or undergoing debt restructuring.

The following business ARE NOT eligible to apply:
• banks, insurers and reinsurers (but not insurance brokers)
• public-sector bodies
• state-funded primary and secondary schools
• businesses who are already claiming under CBILS (however a business which has already received a loan under CBILS may ask their lender to transfer it into the BBLS)

A business can apply for a Bounce Back Loan by completing a short and simple form by visiting the following government site:

Redfern Legal LLP is happy to assist you and your business if you have any questions.

Ioannis Efthyvoulou