Small business Bounce Back Loans: How to access the £50,000 scheme

Bounce Back Loans

The government has announced a number of loan schemes to support businesses during these challenging times, most notably the Coronavirus Business Interruption Loan Scheme.

However, the CBILS solution has faced a heap of criticism, particularly in regards to not being suitable for small businesses. The application process can be lengthy and complicated and despite the 80% government guarantee, banks have been very cautious about lending.

Amidst mounting pressure to change the CBILS scheme to a 100% government guarantee, on 28 April, Rishi Sunak revealed that the government won’t be making any further changes to the coronavirus loan scheme, but would instead be launching an additional loan offering.

Coined Bounce Back Loans, the new support package is aimed at the UK’s smaller businesses, and promises 12 months interest-free loans of up to £50,000 with a 100% guarantee. Perhaps most importantly, the chancellor has insisted that the application process will be incredibly quick and straightforward.

Here’s everything we know about the scheme so far, with more information to follow…

How will the Bounce Back Loans scheme work?

Like the CBILS scheme, the new Bounce Back Loans will be delivered via the British Business Bank and a selection of its approved lenders.

There are now over 50 lenders in the CBILS scheme, including some alternative finance lenders such as Funding Circle and Starling Bank. The list of BBILS current lenders can be found here, it’s a fairly small amount of banks currently, but the scheme is accepting applications for additional lenders.

Loan size will range from £2,000 up to a maximum of £50,000 with borrowing terms of up to six years.

The first 12-months will be interest-free, and crucially for cash-strapped small firms there will be no repayments due in the first year either.

Sunak has also now announced that interest rates will be set at 2.5% after the interest-free period ends.

There is no fee to enter the scheme and you will not need to provide a personal guarantee.

The scheme is similar to one in Germany, (which also has a 100% government guarantee), although in Germany the government itself is the lender rather than designated banks.

When will the loans be up and running?

The scheme went live on Monday 4 May. There has been some issues with the website crashing due to high demand, so it may be best to approach your existing lender directly (check if they’re accredited in the link above).

Who is eligible for the loan?

The scheme is aimed at the UK’s 5.6 million micro businesses, with businesses able to claim up to 25% of turnover, capped at £50,000.

You will also need to have evidence that your business was not an “undertaking in difficulty” as of December 31 2019.

Businesses must be UK-based and have been negatively impacted by coronavirus. Banks, insurers and reinsurers, public-sector bodies and state-funded schools are not eligible for the scheme.

What will the application process be like?

One of the key differentiators of this new loan scheme is that it will require just a simple two-page application form. You will not need to provide detailed business plans or forward financials – and can self-certify all details.

Sunak said in his announcement that banks will not require “forward looking tests of businesses viability” and that funds should be available within just 24 hours.

What does the 100% government guarantee mean?

It’s important to note that even with a 100% government-guarantee, it is still you, the borrower, who is fully responsible for paying back the loan.

The guarantee is to protect the lenders if you did end up defaulting, meaning they will cover 100% of the losses for the lender if that was the case.

The idea is that by modifying the risk to lenders they will be more likely to deliver finance to businesses in need.

Can you apply for a Bounce Back Loan if you’ve already applied for CBILS?

No, you are excluded from applying for a Bounce Back Loan if you’ve already applied for a Coronavirus Business Interruption Loan.

However, if you’ve already received a loan under the CBILS scheme (of up to £50,000) and would like to transfer it to the Bounce Back scheme, you can arrange this with your lender. You must arrange the switch by 4 November 2020.

How much can I borrow?

The loan is capped at £50,000.

How do I apply for a Bounce Back Loan?

The scheme goes live on May 4, and more information about applying will be available on this page then.

Want to look at all of your funding options? Get personalised, pre-qualified offers for your business today in just 30 seconds. Simply enter your company name here.