In addition to the raft of coronavirus support measures from the government, the Chancellor recently announced the new Bounce Back Loan Scheme (BBLS). It went live on Monday 04 May and offers further help to those grappling with the disruption caused by Covid-19. The scheme is designed to help small and medium size businesses to access loans of up to £50,000. Businesses in the hair and beauty sector, which have been hit by the lockdown closures, are among those hoping to benefit from the scheme and can apply via an online form.
Key Features of the Scheme:
- The scheme is available to small and medium size businesses
- The loans will be 100% guaranteed by the Government and personal guarantees will not be required
- Businesses can borrow between £2,000 to £50,000, up to 25% of a business’s turnover
- The interest rate will be fixed at 2.5% per annum
- The Government will cover the interest charges during the first 12 months
- No repayments will be required in the first 12 months and the loans will be for a fixed term of 6 years. Early repayment is allowed without penalty
- No arrangement fees can be charged
- There is currently no deadline for making the application
- Groups of companies can only apply for one loan
- The loans must be used to provide economic benefit to the business and cannot be used for personal purposes
A point to be aware of is that you cannot have a Coronavirus Business Interruption Loan as well as a Bounce Back Loan. The Coronavirus Business Interruption Loan is still available for larger loans and if you have already taken one out, you can apply to have it switched over to this new scheme.
Also, it’s important to remember that this is not a grant. While the loans are ultimately guaranteed by the Government, the borrower is still 100% liable for the debt.
How to Apply:
Applications are made by approaching an accredited lender direct, ideally via their website. The list of accredited lenders can be found here: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/for-businesses-and-advisors/.
The list includes most of the mainstream banks and will be updated as more lenders apply for and receive accreditation.
If you already bank with an accredited lender, it is advisable to approach them in the first instance. It is not necessary to be an existing customer of a bank to make an application although it is likely you will be required to set up a current account with them in order to do so. If one bank turns the application down, there is no reason you cannot approach a different bank straight away.
You will need to fill in a short application form online, which self-certifies that your business is eligible for a loan under BBLS. If your business is eligible, it will be subject to appropriate customer fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks. Some state aid restrictions may apply to your application.
The lender should then make a decision within a few days as to whether your application is successful. The funds will follow shortly after an application is accepted.
Who is Eligible
The scheme is open to traders including limited companies, partnerships and sole traders.
Your business must be able to selfdeclare to the lender that it:
- 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)
- Is engaged in trading or commercial activity in the UK and was established by 1 March 2020
- Is not using the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) or the Bank of England’s Covid Corporate Financing Facility Scheme (CCFF), unless the Bounce Back Loan will refinance the whole of the CBILS, CLBILS or CCFF facility
- 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 (Credit Institutions, Insurance Companies, Public Sector Organisations and State Funded Primary and Secondary Schools)
There will probably be a large number of applications for the scheme initially and so it may take a little time before you receive a response from the bank.
You can find out more about the new scheme at https://www.gov.uk/guidance/apply-for-a-coronavirus-bounce-back-loan
You can read about other financial support measures you may be eligible for at https://www.gov.uk/coronavirus/business-support