The government has announced a 100% government-backed Bounce Back Loan Scheme for small business to help them make it through the coronavirus outbreak.
What does the new Small Business Bounce Back Loan actually mean for small businesses?
Chancellor Rishi Sunak announced a new government-backed loan to support small businesses on Monday 27th April. The scheme will also help sole traders who are struggling financially as a result of coronavirus COVID-19.
The scheme was announced to ensure that small businesses can access the cash they need quickly, in order to continue operating during the coronavirus pandemic.
In response to the announced Business Bounce Back Loan scheme, Director-General for the Confederation of British Industry, Dame Carolyn Fairbairn, described it as “transformational”.
“Sole traders, micro-firms and entrepreneurs will now have a simple route to fast finance to stay afloat, without red tape or time-consuming checks.”
The government already operate a scheme to guarantee 80% of loan amounts made through the Coronavirus Business Interruption Loan Scheme (CBILS). Under the Bounce Back Loan Scheme, businesses can borrow 100% of the amount they apply for.
How much loan the new Small Business Bounce Back Loan is offering?
Small businesses will be able to take out one of the new government-backed loans, borrowing between £2,000 and £50,000.
From when is the scheme available?
Applications for the Bounce Back Loan were open online from 4th May 2020. As with the CBILS, borrowing will be available from approved lenders.
The government have assured anxious businesses that they are working alongside lenders to make sure that the scheme is delivered as quickly as possible, with funds available in just days.
How much interest people will have to pay?
The government has also agreed with lenders that a flat rate of 2.5% interest will be charged on these loans.
Sunak announced that the government were working with lenders to agree to a low level of interest during the repayment period.
In addition to guaranteeing 100% of the loan, the government will pay any fees or interest in the first 12 months. Hence, no repayments will be due during this period to enable firms to get back on their feet.
How do I apply for a Small Business Bounce Back Loan?
Businesses can apply for a loan under the scheme through a short, standardised online application. The applications are available from various lenders.
The following banks are currently offering (or soon to offer) BBLS loans. They are mainly lending to existing business customers, but some may be willing to take on new customers.
- Bank of Scotland
- Barclays
- Clydesdale Bank
- Danske Bank
- HSBC
- Lloyds Bank
- NatWest
- RBS
- Santander
- TSB
- Ulster Bank
- Yorkshire Bank
Terms are the same across all participating banks.
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Unlike CBILS, the government will not cap lenders on the amount they can offer under the government guarantee. Crucially, the government will assess business applications on their viability before coronavirus COVID-19, to make the scheme more accessible.
The loans are available through a network of lenders, including the five largest banks.
Eligible companies will be subject to standard customer fraud, anti-money laundering (AML) and know your customer (KYC) checks prior to any loan request.
However, some state aid restrictions may apply to the application. The government said and pointed out the borrower always remains 100% liable for the debt.
Mike Cherry, national chair of the Federation of Small Businesses, said:
‘We know many small firms have struggled to secure small loans speedily.”
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