The Bounce Back Loan Scheme opened for applications on 4 May, enabling small businesses to seek financial relief during the COVID-19 pandemic. The Scheme will be delivered by lenders accredited by the British Business Bank and will target small and micro businesses. Loans will be available to eligible companies, ranging from £2k up to 25% of the business’ turnover, with a maximum loan of £50k. Application forms have been standardised to allow for a faster process with many loans becoming available within days.
Key features of the Scheme
- Loans will be available from £2,000 up to 25% of a business’ turnover or £50,000, whichever is lower.
- The lender will be provided with a government-backed, full guarantee against the outstanding facility balance (including capital and interest). Please note that the borrower will remain liable for repayment of the debt.
- The interest rate has been fixed by the government at 2.5% per annum, meaning businesses will benefit from the same low rate of interest.
- The government will pay interest on the loan for the first 12 months.
- No principal repayments are made in the first 12 months, thereafter capital will be repaid on a straight line basis.
- No guarantee fee for businesses or lenders to access the scheme.
- The term of the loan is six years but early repayment is allowed, without incurring early repayment fees.
- No personal guarantees are allowed, and no recovery action can be taken over a principal private residence or principal private vehicle.
In order to prove eligibility under the Scheme, a business must self-certify to the lender each of the following:
- it is a UK-based business and was incorporated before 1 March 2020;
- it has been adversely affected by coronavirus;
- it is not currently using a government-backed coronavirus loan scheme (unless using the Scheme to refinance such a loan); and
- it is not in the process of bankruptcy, liquidation or undergoing debt restructuring.
Applications should be submitted direct to an accredited lender. A current list of accredited lenders can be found here.
Further information on the Scheme can be found here.