‘Bounce Back Loans’ Scheme Goes Live

Earlier this week, a new, government-backed loan scheme went live across the country. It aims to help small and medium-sized businesses (SMEs) navigate the financial fallout caused by COVID-19 (Coronavirus).

As of Monday 4th May, UK businesses are now able to borrow up to £50,000 – accessible within days – through a government scheme dubbed: ‘Bounce Back Loans’.

The loans have a 100% guarantee from central government and will be interest free for the first year. With the government insisting that this scheme is easier to apply for than previous alternatives, banks received ‘100,000 loan applications’ on the first day alone.

According to the Treasury, the government is working closely with participating lenders (10 banks have been accredited) to make sure the loans are advanced as quickly as possible with a settled, low standardised level of interest for the remaining period of the loan.

It is hoped the scheme will help “bolster the existing package of support available to small businesses affected by the Coronavirus pandemic.”

Can I apply?

This scheme offers loans from £2,000 to £50,000, and there is no set limit on the size of company that can apply. The criteria that is required to apply for the loan is as follows:
  • Your business is based in the UK and was trading as of March 1st
  • Your business has been negatively impacted by COVID-19 (Coronavirus).
Banks and insurers are ineligible, as are public sector bodies and state-funded schools.

We must stress that this is a loan – not a grant. Therefore, it will need to be repaid in full. However, businesses will only start repaying their loans after 12 months, with all lenders charging a flat rate of 2.5%. The loans will last up to six years.

Furthermore, you cannot apply if your business is already benefitting from the Coronavirus Business Interruption Loan Scheme (CBILS). If this applies to you, you can transfer your CBILS loan into the Bounce Back Loan scheme up to November this year. There’s more information on the CBILS, here.

Bounce Back Loans & Limited Company Directors

If you’re the sole director of a Limited Company and you’re applying on behalf of your business, you’ll be eligible for a Bounce Back loan.

All applications must be made by the business and the loan must be used wholly for business purposes, not personal use.

So, in short, you should not take out a Bounce Back Loan for your business, only to then take a director’s loan out of the company to fund your personal finances.

‘Crucial New Initiative’

When he first announced the plans last week, the Chancellor, Rishi Sunak, said the scheme would ‘ensure’ that small businesses would have access to the cash they ‘need’ in order to get through this crisis.

“This new rapid loan scheme will help ensure they [small businesses] get the finance they need quickly to help survive this crisis,” he said. “This is in addition to business grants, tax deferrals, and the job retention scheme, which are already helping to support small businesses.”

Those in industry have reacted positively to the scheme too with Mike Cherry, National Chairman of the Federation of Small Businesses, hailing it as a ‘decisive intervention’ which could save ‘millions of jobs’.

He said: “This crucial new initiative should enable thousands of small businesses to access the working capital they need quickly, helping to protect the millions of jobs they provide in every part of the UK.”

Bounce Back Loans: Apply Now

You can apply for a ‘Bounce Back Loan’ online, here.

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