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New bounce back loan scheme opens for smallest UK businesses

4 May 2020

Delivered by lenders accredited by the British Business Bank for this scheme, Bounce Back Loans target small and micro businesses in all sectors1, providing loans from £2k up to 25% of the business’ turnover with a maximum loan of £50k.

Following the Chancellor of the Exchequer’s announcement on 27 April, the Bounce Back Loan Scheme opens for applications from today. Providing lenders with a 100% government-backed guarantee and standardising the application form is expected to lead to a faster process with many loans becoming available within days.

Lenders under scheme can provide loans of up to £50k over six years, with the first 12 months of interest paid by government, then 2.5% pa interest. Repayments can be deferred for 12 months.

The Bounce Back Loan Scheme enables businesses to obtain a six-year term loan at a government set interest rate of 2.5% a year. The government will cover interest payable in the first year.

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

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. 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.

Borrowers will not have to begin principal repayments for the first 12 months, thereafter capital will be repaid on a straight line basis and there will be a no guarantee fee for businesses or lenders to access the scheme.

The length of the loan is for six years but early repayment is allowed, without early repayment fees. No personal guarantees are allowed, and no recovery action can be taken over a principal private residence or principal private vehicle.

Credit institutions (falling within the remit of the Bank Recovery and Resolution Directive), public sector bodies, a state -funded primary or secondary schools and insurance companies are not eligible to apply and subject to State-Aid restrictions.

Eligibility criteria Businesses from all sectors2 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 a short 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.

A fact sheet for SMEs is also available here.


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