COVID-19 Bounce Back Loans Scheme

Added by Love Business East Midlands | 4 May 2020

UPDATED: 5 May 2020

The bounce-back loans scheme specifically targets small and micro businesses in all sectors, providing loans from £2,000 up to 25 per cent of their turnover with a maximum loan of £50,000.

A Six Year Term Loan at a Government Set Interest Rate of 2.5% p.a.

Delivered by lenders accredited by the British Business Bank, the bounce-back loans scheme provides lenders with a 100% government-backed guarantee and a simplified application process is expected to free up cash for many businesses within days. The Treasury wrote to British lenders confirming that the scheme (BBLS) would be excluded from stringent consumer protection laws to help speed up the process of getting money to small businesses.

"Small businesses will play a key role creating jobs and securing economic growth as we recover from the Coronavirus pandemic. The bounce back loan scheme will make sure they get the finance they need – helping them bounce back and protect jobs."

"....As a 100 per cent guaranteed loan scheme, the price of BBLS is critical to its success: together, we need to ensure that these loans are affordable and accessible. As such, and incorporating a range of data, I have come to the decision that the rate should be set at 2.5 per cent,"

Chancellor Rishi Sunak

The government will cover interest payable in the first year

• Up to £50,000 loan: Loans will be from £2,000 up to 25% of a business’ turnover or £50,000, whichever is lower.

• 100% guarantee: The scheme provides the lender with a government-backed, full guarantee (100%) against the outstanding facility balance, both capital and interest. The borrower always remains 100% liable for the debt

• Interest rate: The government has set the interest rate for this facility at 2.5% per annum, meaning businesses will all benefit from the same, low rate of interest.

• Interest paid by government for 12 months: The government will make a Business Interruption Payment to the lenders to cover the first 12 months of interest payable, so businesses will benefit from no upfront costs.

• No principal repayments for first 12 months: Borrowers will not have to begin principal repayments for 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

• Finance terms: The length of the loan is for six years but early repayment is allowed, without early repayment fees.

• No personal guarantees: No personal guarantees are allowed, and no recovery action can be taken over a principal private residence or principal private vehicle.

Eligibility criteria

Businesses from all sectors can apply for a facility. The business must self-certify to its lender the following:

• Confirm it is UK-based in its business activity, and established by 1 March 2020

• Confirm it has been adversely impacted by the Coronavirus (COVID-19)

• Confirm it is not currently using a government-backed Coronavirus loan scheme (unless using BBLS to refinance a whole facility)

• Confirm it is not in bankruptcy, liquidation or undergoing debt restructuring

How to apply

Businesses should check the British Business Bank website to find out which lenders provide Bounce Back Loans.

Businesses will be required to fill in an online application form on their lender’s website, which self-certifies whether they are eligible for a Bounce Back Loan facility. Eligible companies will be subject to standard customer fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks. Some State aid restrictions may apply to applications.

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