Many businesses are struggling with cashflow due to the impact and disruption caused by Covid-19. However, the government together with the British Business Bank is committed to supporting viable businesses, with a variety of financial support measures.
One of the latest is the Bounce Back Loan Scheme (BBLS), which is designed to provide smaller businesses with access to finance quickly during the coronavirus pandemic. The scheme was announced by the chancellor and became available in May 2020, with an aim to help businesses which were trading successfully prior to the coronavirus outbreak.
The Chancellor, Rishi Sunak, described how close to 70,000 businesses applied for loan on the day the scheme launched. The figures suggest there is ample demand across the country from small businesses looking for cash to help them bounce back from the crisis.
The Bounce Back Loan Scheme aims to provide small and medium sized businesses with access loans of up to 25% of their usual turnover.
The minimum amount available is £2,000, with a maximum loan of £50,000.
To improve access to the scheme, the government will be guaranteeing 100% of the loan. In addition, there are no interest charges or fees for the first 12 months.
Following this period, the interest rate will increase to 2.5% per year. This interest rate is not set by lenders and will apply to all loans offered through the scheme.
It is important to remember that following the first 12 months you will be required to repay 100% of the amount borrowed, this specific scheme is a loan with an interest rate of 2.5% and is not a grant.
The loan terms are set to 6 years, however your business will be able to repay the loan earlier without being charged a fee.
Although, no payments will be expected during the first 12 months. In addition, there will be no requirement to provide a personal guarantee or other form of security to available of the scheme.
The government has indicated that there is no maximum cap set for the total lending provided through this business interruption scheme, instead the scheme will be led by business demand.
This means that if your business does not need financial support in the short-term, it will be possible to wait and approach lenders in the future.
Prior to the introduction of the Bounce Back Loan Scheme, many businesses were applying for the Coronavirus Business Interruption Loan Scheme.
However, the CBILS applications require additional checks and many banks have been criticised for taking too long to provide businesses with the cash they desperately need.
In addition, loans through the CBILS are offered with varying interest rates and have a lower government guarantee, which may result in higher interest rates than the Bounce Back Loans.
To be eligible for the Bounce Back Loan Scheme your business must be based in the UK and must have been established before 1 March 2020. The length of your business' trading history is not an eligibility requirement. Bounce Back Loans are only available to businesses which have been negatively impacted by the coronavirus outbreak. If your business was already classed as being in difficulty on 31 December 2019, you will need to confirm that your business is complying with additional restrictions to state aid.
There are some restrictions to the industries which are eligible for a loan, including banks, public-state bodies and state-funded primary and secondary schools. In addition, banks, insurers and reinsurers are not eligible, however insurance brokers can apply. There are also some restrictions for businesses operating within fisheries, aquaculture, agriculture or logistics.
The Bounce Back Loan Scheme runs alongside a variety of government financial support measures, so if you are already in receipt of this funding you may not be able to apply. The rules apply to the following schemes; the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the COVID-19 Corporate Financing Facility.
However, it you have already received a loan of under £50,000 under one of these schemes, it is possible to transfer the balance across to the Bounce Back Loan Scheme. Although, the transfer must be completed before 4 November 2020 and should be arranged with your original lender.
There are currently 11 lenders which are participating in the bounce back loan scheme, including many of the well-known British business and retail banks. However, the scheme only became available in May 2020 and more high street British business banks are expected to follow shortly.
If you are unsure which bank to apply through, the British Business Bank has a list of the current lenders on its website.
To apply for a loan, you will need to approach an eligible British business bank and complete an application via the lenders website. There are no restrictions where you can apply for a bounce back loan, so there is no requirement to apply through your usual business bank. However, applications from new business customers may take longer to process.
The online application form is designed to be short, with businesses asked to self-declare that they are eligible when they apply for a loan.
During the loan application, businesses will need to provide general information such as their trading name, business address, bank account information and the usual business turnover. If a business does not have a business current account, the lender may ask for additional information to verify the applicant's eligibility for a bounce back loan.
The business bank will then process your application and decide whether you are eligible for a bounce back loan or another form of finance.
Your business will be asked to review the repayment costs associated with the bounce back loan scheme and confirm that you are able to and intend to make the repayments, following the first 12 months payment free period.
The lender may decide to register your Bounce Back Loan with the credit reference agencies, so any missed or delayed payments may affect your credit rating.
If the business bank which you initially apply to rejects your application, it is possible to apply to another business bank which is participating in the scheme. The British Business Bank has issued a finance guide to help businesses decide where to apply. However, if you are unsure where to apply, it is possible to use the services of a broker to find the right finance option for your specific requirements.
As a comparison service, we have partnered with a variety of businesses which provide a range of finance options. If you are not eligible for a Bounce Back Loan or are looking for an alternative form of finance, we can help you compare and apply for a variety of finance forms. Whether you are looking for a business loan, asset or invoice finance, bank account or even cheaper business insurance and energy, we aim to help businesses apply for the most competitive options. To find out more, please contact our team today.