Bounce back loan - New help for small businesses 1

Bounce back loan: New help for small businesses

Linkilaw Legal News

The UK government has launched a new help for small businesses, the Bounce Back Loan Scheme (BBLS). The scheme was launched on 4th May 2020 and aims to provide financial support to businesses impacted by the Covid-19 outbreak but can’t access coronavirus funding quick enough.

Businesses can apply to accredited lenders by filling out a simple online form. It offers easy access to apply for loans of up to £50,000 with no interest charged or repayments needed in the first 12 months. The money is expected to be available within days and is 100% government backed for the lender.

In this article we will take you through the details of this loan, who is eligible and how to apply.

How does the Bounce Back Loan Scheme work? 

The scheme has been designed as a simple and faster alternative to the existing Coronavirus Business Interruption Loan Scheme (CBILS).

Its purpose is to help small and medium-sized businesses affected by coronavirus to access loans between £2,000 and £50,000. The loans are available through a network of lenders, including the UK five largest banks.

The Government will make a Business Interruption Payment (BIP) to cover the first 12 months of interest payments. After this period, there will be a flat rate of 2.5% interest, payable from month 13. The term of the loan can be up to 6 years.

Any business that has already taken out a Coronavirus Business Interruption Loan of £50,000 or less can apply to have these switched over to this new scheme until 4th  November 2020.

Who is eligible?

While the loans are aimed at smaller businesses and sole traders, there is no limit on the size of businesses that can apply.

To be eligible for the loan, you must be able to declare to the lender that your business:

  • Has been negatively impacted by the coronavirus pandemic
  • Is based in the UK
  • Was already trading on March 1st 2020
  • Wasn’t in financial difficulty on 31 December 2019

How to apply

The applications are directly through the list of accredited lenders. The applications are formed of seven questions.

This will include information about turnover, tax details, bank account and how the lockdown and Covid-19 has impacted your business. You do not have to provide security and personal guarantees.

If your business is eligible, it will be subject to the appropriate customer fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks and funds should be available within days.

Final thoughts

According to the big UK banks, around 100,000 applications in a single day were received for the Bounce Back Loan Scheme.

However, businesses should think very carefully before taking on a new debt as both the Treasury and banks are keen to emphasise that they are loans that need to be repaid.

As always, you are advised to do your own due diligence and seek appropriate financial advice for your own specific circumstances.

At Linkilaw, we remain available to answer your questions, provide legal support to your business operations and help you weather the storm.

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