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Coronavirus (COVID-19): Guidance on applying for a Bounce Back Loan

6 May, 2020

From Monday 4 May 2020, businesses are able to apply for the government’s new ‘Bounce Back Loan’ scheme.

The new Scheme is designed for small businesses who have raised concerns with the slow access to the existing government-backed schemes due to the extensive credit checks required by banks.

Under the new scheme, the government will take on all the risk which will hopefully allow small businesses to access loans quickly and free up a backlog of credit checks under existing schemes.

Commercial associate solicitor, Shaun Guppy, and trainee solicitor Zaeem Mughal look at how businesses can apply for a Bounce Back Loan.

What is the Bounce Back Loan Scheme?

Businesses will be able to borrow between £2,000 and £50,000 (up to a maximum of 25% of that business’ turnover).

Loan terms can be up to 6 years from the date of drawdown. No capital, fees or interest payments will be due in the first 12 months. Instead, the government will pay the interest for the first 12 months and the government have agreed with lenders a flat interest rate for the remaining term at 2.5% per annum.

The government will guarantee 100% of the loan. Lenders are not permitted to take personal guarantees or take recovery action over a borrower’s personal assets.

Eligibility for a Bounce Back Loan

You can apply for a loan if your business:

  • is based in the UK;
  • has been negatively affected by coronavirus; and
  • was not an ‘undertaking in difficulty’ on 31 December 2019.

The following are not eligible to apply:

  • banks, insurers and reinsurers (but not insurance brokers);
  • public-sector bodies; and
  • state-funded primary and secondary schools.

How to apply for a Bounce Back Loan

The Bounce Bank Loan is available through a range of British Business Bank accredited lenders and partners.  Details with regards accredited lenders and partners can be found on the British Business Bank website.

You should approach a lender yourself, ideally via its website. The British Bank has advised that you should approach your own provider in the first instance but that you may also consider approaching other lenders if you are unable to access the finance you require.

The scheme will require completing a self-certification form online with your chosen lender and once approved, loans should be received very shortly thereafter.

Coronavirus Business Interruption Loan Scheme, (CBILS)

You cannot apply for the Bounce Back Loan if you are already claiming under CBILS. However, if you have claimed up to £50,000 under CBILS, you can convert your loan into the Bounce Back Loan. In order to do this, you will need to speak to your lender. This option will be open until 4 November 2020.

For further information, including the full rules of the scheme and on how to apply, please visit the British Business Bank website via the link below:

https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/

Visit our Coronavirus (COVID-19) Hub for more Leading Insights.

*The information set out in this article is correct at the date of publication (06 May, 2020). The effect of coronavirus on businesses is a fast-changing area and so it is important to obtain legal advice to ensure you are properly protected.

Contact us

If you have any questions regarding the impact of the Coronavirus upon your business or are seeking up-to-date legal advice on Company & Commercial matters, contact Shaun Guppy on 01202 294 566 or email ShaunGuppy@steeleraymond.co.uk.

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