Coronavirus Bounce Back Loan Scheme – Further Details Announced
From today (4 May 2020), businesses that have been affected by the coronavirus pandemic can apply for a loan under the Bounce Back Loan Scheme (BBLS).
As noted in our previous blog, the BBLS was introduced to help smaller businesses that were struggling to obtain finance under the previously announced Coronavirus Business Interruption Loan Scheme (CBILS). The key features of the BBLS are as follows:
- Small and medium sized businesses can apply for a loan from £2,000, up to 25% of the business’ turnover (capped at £50,000).
- The loan will be guaranteed 100% by the government (as opposed to 80% guaranteed under the CBILS).
- The government will pay interest and fees for the first 12 months, and the interest rate for the facility is set at 2.5% per annum.
- Loan terms will be up to 6 years.
- The borrower will not be required to pay any fees or interest for the first 12 months, and does not need to make any repayments for the first 12 months.
In order to be eligible for the loan, your business must be able to demonstrate that:
- it has been negatively impacted by the coronavirus (COVID-19) pandemic.
- it was not a ‘business in difficulty’ at 31 December 2019.
- it was engaged in trading or commercial activities in the UK and was established by 1 March 2020.
- it is not using the CBILS, the Coronavirus Large Business Interruption Loan Scheme (CLBILS), or the Bank of England’s Covid Corporate Financing Facility Scheme (CCFF – unless the Bounce Back Loan will refinance the whole of the facility.
- it is not in bankruptcy or liquidation, and is not undergoing debt restructuring at the time it submits its application.
- it derives more than 50% of its income from its trading activity (i.e. as opposed to funding/grants or investment activities). This requirement does not apply to charities or further-education colleges.
- it is not in a restricted sector, i.e. credit institutions, insurance companies, public-sector organisations, and state-funded primary and secondary schools.
‘Affected by Coronavirus Pandemic’
As noted above, to qualify for the loan your business must be able to self-declare to the lender that it has been affected by the coronavirus pandemic. That said, there doesn’t appear to be any guidance on what negatively impacted means in this context. When determining whether your business has been negatively impacted by the coronavirus pandemic, you may wish to consider the following:
- Is turnover lower than expected?
- Are your debts recoverable?
- Are profits lower than expected?
- Are there fewer customers/business enquiries than expected?
- Has the number of transactions decreased?
- Have you needed to reduce prices/apply discounts?
How Can I Apply?
Firstly, you will need to find a lender. A list of current accredited lenders and partners for the BBLS can be found here. You should first approach your own provider, however if finance is not forthcoming you may also consider approaching other lenders.
Once you have identified your preferred lender, you will need to fill in a short application form which self-certifies that your business is eligible for a loan under BBLS.
If the lender turns you down, you can still approach other lenders within the scheme.
The full rules of the scheme and guidance on how to apply can be found on the British Business Bank website.
Announcement – Coronavirus Bounce Back Loan Scheme (28 April 2020)
Self-Assessment – Pay Later (COVID-19 Measure) (9 April 2020)
Coronavirus & The Statutory Residence Test (1 April 2020)
Protect & Thrive – Asset Protection & Holding Companies (30 March 2020)
All about the Coronavirus Job Retention Scheme (27 March 2020)
Coronavirus Self-Employed Income Support Scheme (26 March 2020)
PD Tax Tip: Covid-19 & Tax Compliance (25 March 2020)