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Bounce Back Loans

Today (4 May) sees the launch of the latest in UK Government guaranteed loan products – the Bounce Back Loans (BBLS) – this one aimed at “SMEs, micro businesses and other businesses requiring smaller loans”.

Details are up on the British Business Bank’s webpage found here – extracts below (with some accredited lenders listed – see further below).

Finance available

  • Minimum loan is £2,000
  • Maximum loan is set at lower of 25% of a business’ turnover and £50,000
  • The length of the loan is six years but early repayment is allowed, without early repayment fees
  • No fees or interest to pay for the first 12 months
  • No loan repayments will be due during the first 12 months
  • The interest rate for the facility is set at 2.5% per annum
  • Lenders are not permitted to take personal guarantees or take recovery action over a borrower’s personal assets (such as their main home or personal vehicle)

The government will provide lenders with a 100% guarantee for the loan (outstanding capital and interest).

The borrower remains 100% liable for the debt.

Eligibility

Your business must be able to selfdeclare to the lender:

  • the business is a UK limited company or partnership, or tax resident in the UK
  • is engaged in trading or commercial activity in the UK and was established by 1 March 2020
  • has been impacted by the coronavirus (COVID-19) pandemic
  • was not a business in difficulty at 31 December 2019 (if it was, you must confirm your business complies with additional state aid restrictions under de minimis state aid rules – more detail found here and found here )
  • is not in bankruptcy or liquidation or undergoing debt restructuring at the time it submits its application for finance
  • derives more than 50% of its income from its trading activity (this requirement does not apply to charities or further-education colleges)
  • is not in a restricted sector (see below)
  • will use the loan only to provide economic benefit to the business (for example providing working capital), and not for personal purposes
  • has understood the costs associated with repayment of the loan and are able and intend to complete timely repayments in future

Further, if the business was a ‘business in difficulty’ on 31 December 2019, then a loan under the Scheme is not permitted to be used for export-related activities.

Business in the following sectors are not eligible to apply:

  • Credit institutions (falling within the remit of the Bank Recovery and Resolution Directive)
  • Insurance companies
  • Public-sector organisations
  • State-funded primary and secondary schools

Interaction with CBILS, CLBILS and CCFF

You will not be eligible for the Bounce Back Loan Scheme if the business (and any wider group of which it is part) has obtained a loan through either the CBILS, the CLBILS, or the CCFF, unless that loan will be refinanced in full by the Bounce Back Loan Scheme facility.

Found here is a FAQs for small businesses which contains a table differentiating BBLS from CBILS.  Points include:

  • Under BBLS Lenders do not have to assess a business’ affordability or viability. Lenders are not responsible for the borrower’s decision to borrow
  • BBLS is subject to the many of the usual consumer protections that apply to business lending under £25,000. Borrowers do not have the benefit of protection and remedies that would otherwise be available under the Consumer Credit Act 1974 

How to apply

The Scheme will be available through the British Business Bank’s accredited lenders. A list of lenders is available available here.  (At the time of drafting this blog there were 6 accredited lenders and two of these appear open for applications).

Businesses will be required to fill in a short online application form and self-declare that they are eligible for the Scheme. (Example of which may be found at Danske Bank BBLS webpage found hereillustrative only unless you are an existing customer of that bank).

In the first instance, businesses, where possible, should approach their own Bounce Back Loan Scheme accredited provider. They may also consider approaching other Scheme accredited providers if they are unable to access the finance they need or if their existing provider is not accredited to provide loans under the Scheme.

The Scheme has been designed to enable businesses to access finance quickly. Businesses are required to complete an online application form, which is expected to be assessed by their lender within a matter of days.

In some instances, the lender may ask you for additional information, such as an HMRC self-assessment tax return. Eligible companies will be subject to standard customer fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks.

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