The Bounce Back Loan Scheme (BBLS) is a new scheme designed to enable businesses to access finance more quickly during the coronavirus outbreak.
About the scheme
The Bounce Back Loan Scheme (BBLS) provides financial support to businesses across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak and that can benefit from £50,000 or less in finance.
The scheme is a part of a wider package of government support for UK businesses and employees.
How it works
BBLS is available through a range of British Business Bank accredited lenders and partners, listed on the British Business Bank website.
A lender can provide a six-year term loan from £2,000 up to 25% of a business’ turnover.
The maximum loan amount is £50,000.
The scheme gives the lender a full (100%) government-backed guarantee against the outstanding balance of the facility (both capital and interest).
The borrower always remains fully liable for the debt.
Key features of the scheme
|Finance of up to £50,000||Guarantee to the lender to encourage them to lend||Government pays interest and fees for 12 months||Affordable interest rate|
|Loans range from £2,000 up to 25% of a business’ turnover. The maximum loan amount is £50,000.||The scheme provides the lender with a full (100%), government-backed guarantee against the outstanding balance of the finance (both capital and interest).
The borrower remains 100% liable for the debt.
|The Government will make a Business Interruption Payment (BIP) to cover the first 12 months of interest payments.
The borrower does not have to make any repayments for the first 12 months.
|The interest rate for the facility is set at 2.5% per annum, meaning businesses will all benefit from the same, affordable rate of interest.|
|Finance terms||Security||No guarantee fees for businesses or lenders|
|The length of the loan is six years but early repayment is allowed, without early repayment fees.||Lenders are not permitted to take personal guarantees or take recovery action over a borrower’s personal assets (such as their main home or personal vehicle).||There is no fee to access the scheme for either businesses or lenders.|
HOW TO APPLY
- FIND A LENDER
- APPROACH A LENDER
You should approach a lender yourself, ideally via its website.
In the first instance, you should approach your own provider. You may also consider approaching other lenders if you are unable to access the finance you require.
You will need to fill in a short application form online, which self-certifies that your business is eligible for a loan under BBLS.
If your business is eligible, it will be subject to appropriate customer fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks. Some state aid restrictions may apply to your application.
- THE LENDER MAKES A DECISION
The lender has the authority to decide whether to offer you finance.
Under the scheme, lenders are not permitted to:
- take any form of personal guarantee
- take recovery action over a borrower’s personal assets (such as their main home or personal vehicle)
- IF THE LENDER TURNS YOU DOWN
If one lender turns you down, you can still approach other lenders within the scheme.
BBLS is designed to be fast for lenders to process and quick and easy for businesses to access. To help achieve this, you will only be required to fill out a short application form online.
WHO IS ELIGIBLE
Your business must be able to self‑declare to the lender that it:
- has been impacted by the coronavirus (COVID-19) pandemic
- was not a business in difficulty at 31 December 2019
- is engaged in trading or commercial activity in the UK and was established by 1 March 2020
- is not using the Coronavirus Business Interruption Loan Scheme (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 CBILS, CLBILS or CCFF facility
- is not in bankruptcy or liquidation or undergoing debt restructuring at the time it submits its application for finance
- derives more than 50% of its income from its trading activity
- is not in a restricted sector (see below)
Bounce Back Loans are available to businesses in all sectors, except the following:
- Credit institutions (falling within the remit of the Bank Recovery and Resolution Directive)
- Insurance companies
- Public-sector organisations
- State-funded primary and secondary schools
The link is here:
Am I eligible?
The Scheme is open to most businesses, regardless of turnover, who meet the eligibility criteria and who were established on or before 1 March 2020. Borrowers are required to declare, amongst other things, that:
- The business is engaged in trading or commercial activity in the UK at the date of the application, was carrying on business on 1 March 2020 and has been adversely affected by coronavirus (COVID-19).
- The business (and any wider group of which it is part) has not already received a Bounce Back Loan Scheme facility.
- The business (and any wider group of which it is part) has not yet obtained a loan through either the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, or the Covid Corporate Financing Facility, unless that loan will be refinanced in full by the Bounce Back Loan Scheme facility.
- That the business is a UK limited company or partnership, or tax resident in the UK
- The business is not a bank, building society, insurance company, public sector organisation, state-funded primary or secondary school, or an individual other than a sole trader or a partner acting on behalf of a partnership.
- Whether or not the business was, on 31 December 2019, a “business in difficulty” and does not breach State aid restrictions under the Temporary Framework; and if it was a “business in difficulty” then it must confirm it does not breach de minimis State aid restrictions and will not be used to support export-related activities.
- At the time of submitting their loan application, the business is neither in bankruptcy, debt restructuring proceedings, liquidation or similar.
- More than 50% of the income of the business (together with that of any member of any group of which it is a part) is derived from its trading activity. This confirmation is not required if the borrower is a charity or a further education college.
- They will use the loan only to provide economic benefit to the business, and not for personal purposes. They have understood the costs associated with repayment of the loan and that they are able and intend to complete timely repayments in future.
The application form also requires confirmations to be given in relation to losses that may be incurred, impact on credit rating, financial risk to personal assets (other than primary residence and primary personal vehicle), reduced consumer protection provisions, data protection consents and that lenders will not assess affordability. Borrowers are advised that they should seek independent legal advice if they are in any doubt about the consequences of the loan agreement not being regulated by the Financial Services and Markets Act 2000 or the Consumer Credit Act 1974 or any other aspect of taking out a loan.
For some businesses, who self-declare as being a “business in difficulty” on 31 December 2019, there may be restrictions on the amount of finance they are allowed to borrow and what they can do with the loan.
How do I apply?
The Scheme will be available through the British Business Bank’s accredited lenders.
Businesses will be required to fill in a short online application form and self-declare that they are eligible for the Scheme.
In the first instance, businesses, where possible, should approach their own Bounce Back Loan Scheme accredited provider. They may also consider approaching other Scheme accredited providers if they are unable to access the finance they need or if their existing provider is not accredited to provide loans under the Scheme.
How long is the scheme open?
The Scheme is intended to be a temporary response to the unprecedented challenges to businesses as a result of coronavirus (COVID-19). The Scheme will initially open until 4 November 2020, with the government retaining the right to extend this.
How much can I apply for?
Businesses can apply for between £2,000 up to 25% of their turnover. The maximum loan available under the Scheme is £50,000. The government will cover the interest repayments for the first 12 months.
The government-backed guarantee on the loan is a guarantee to lenders. Businesses remain 100% liable to repay the full loan amount, as well as interest, after the first year.
How long will it take me to get the funds?
The Scheme has been designed to enable businesses to access finance quickly. Businesses are required to complete an online application form, which is expected to be assessed by their lender within a matter of days.
In some instances, the lender may ask you for additional information, such as an HMRC self-assessment tax return. Eligible companies will be subject to standard customer fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks.
What products are available under the Bounce Back Loan Scheme?
Accredited lenders are only permitted to provide term loans under the Scheme. The Scheme is targeted at supporting those businesses who need access to finance quickly and, therefore, requires lenders to offer a standard product.
For those seeking finance above £50,000, the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, or the Bank of England’s Covid Corporate Financing Facility scheme may be suitable.
When do I have to start repayments?
The borrower is 100% liable for repaying the loan and any interest. The government will cover interest payable to the lender for the first 12 months. The borrower will then need to make full repayments (the loan and any interest) up to the end of the six-year term, as per their arrangement with the lender.
What fees and interest will I be required to pay?
The government has set the interest rate for this facility at 2.5% per annum. Lenders are not permitted to charge any fees.
What term can I borrow this over?
Loans under the Bounce Back Loan Scheme are available over a fixed six-year term
How much am I meant to repay?
Businesses are not required to make repayments for the first 12 months but will still have to repay the loan and any interest after 12 months.
Can I repay early?
Early repayment is permitted at any stage, without early repayment fees.
What checks will I be subject to?
Applicants are required to self-declare they meet the eligibility criteria for the Scheme. Eligible companies will be subject to standard customer fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks.
What can I use the loan for?
The business must confirm to the lender that the loan will only be used to provide an economic benefit to the business, for example providing working capital, and not for personal purposes.
If the business was a “business in difficulty” on 31 December 2019, then a loan under the Scheme is not permitted to be used for export-related activities.
There are no limits on the amount of the facility that can be used for refinancing.
What happens if I find I’m struggling to repay the loan?
You should talk to the lender if you are experiencing financial difficulties and they will have standard processes in place to support customers in those circumstances.
Lenders are not permitted to require personal guarantees for the Bounce Back Loan Scheme.
For sole traders or small partnerships, who often risk their personal assets when borrowing, the terms of the Bounce Back Loan Scheme means no recovery action can be taken over a principal private residence or a primary personal vehicle.
Do you support all businesses?
The Scheme is open to most UK businesses, regardless of turnover, who self-declare they meet the eligibility criteria. For some businesses, who self-declare as being a “business in difficulty” on 31 December 2019, there may be restrictions on the amount of finance they are allowed to borrow and what they can do with the loan.
Can I apply for a CBILS facility as well as a Bounce Back Loan Scheme facility?
A business is not able to take out a Bounce Back Loan Scheme facility if they have been approved for a CBILS facility, and vice versa.
However, a business that has a CBILS facility can apply for a Bounce Back Loan Scheme facility if the Bounce Back Loan Scheme facility will refinance the CBILS facility in full. All accredited lenders who have approved CBILS loans so far will allow customers to refinance their loan into the Bounce Back Loan Scheme where appropriate, however, borrower protections under these schemes differ, and businesses should discuss these with their lender.
What is the difference between CBILS and the Bounce Back Loan Scheme?
|CBILS||Bounce Back Loan Scheme|
|Guarantee||Provides the lender with a government-backed, partial guarantee (80%) against the outstanding guarantee facility balance (only principal). The portfolio cap has now been removed.||Provides the lender with a government-backed, full guarantee (100%) against the outstanding guarantee facility balance (both principal and interest), with no portfolio cap.|
|Guarantee fee for businesses||No fee.||No fee.|
|Fee charged to lenders for each facility||A fee is charged to lenders for each facility which makes use of the Scheme.||No fee to lenders.|
|Types of facility||Facilities available include term loans, overdrafts, invoice finance and asset finance facilities.||Term loan only.|
|Maximum and minimum value of facility||Following the launch of the Bounce Back Loan Scheme the minimum for term loans and overdrafts will be £50,001. Lenders delivering asset or invoice finance facilities only will still be able to provide finance at less than £50,001.
The maximum value of a facility provided under the Scheme is £5m.
|The minimum value of a facility provided under the Scheme is £2,000; the maximum is 25% of turnover up to a cap of £50,000.|
|Interest rate and fees set by lender||Interest and fees are set by accredited lenders and will vary by lender.||The interest is set by government at 2.5% per annum. No lender-levied fees.|
|Repayment terms||Repayment terms limited to a maximum of six years for term loan and asset finance facilities up to £5m. For overdrafts and invoice finance facilities, terms will be up to three years.
The government will make a Business Interruption Payment to the lender to cover first 12 months of interest and fees payable.
Principal repayment holidays are at the discretion of the lender.
|Repayment terms are six years, but there are no additional fees for early repayment charges.
The government will make a Business Interruption Payment to the lender to cover first 12 months of interest payable.
The borrower has a 12-month principal repayment holiday.
|Refinancing||Re-financing limited to a maximum of 20% of a lenders’ total CBILS lending.||There is no restriction on the total amount of the facility that may consist of refinancing.|
|Assessment of affordability and viability||Businesses must:
• Have a borrowing proposal which the lender would consider viable, were it not for the current pandemic
All lending decisions remain fully delegated to lenders.
|The borrower is required to self-declare they meet the eligibility criteria for the scheme.
Lenders do not have to assess a business’ affordability or viability. Lenders are not responsible for the borrower’s decision to borrow.
|Borrower’s protection||All existing statutory rights (for example, Consumer Credit Act and FCA protections) apply.||Not subject to the many of the usual consumer protections that apply to business lending under £25,000. Borrowers do not have the benefit of protection and remedies that would otherwise be available under the Consumer Credit Act 1974.|
|Businesses eligible||Available to UK-based businesses with annual turnover of up to £45m per year.
Smaller businesses from all sectors can apply for the full amount of the facility. However, fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment.
|Available to most UK-based businesses, regardless of turnover.
If the business is a “business in difficulty” as of December 31 2019 then businesses in agriculture, aquaculture or fisheries may not qualify for the full amount; and the loan cannot be used for export-related activities.
|Personal guarantees||No personal guarantees for any facilities below £250,000. Other forms of security may still be required by the lender.
Security, including personal guarantees may still be required for facilities above £250,000 but they exclude a borrower’s main home; and recoveries are capped at a maximum of 20% of outstanding balance.
|No personal guarantees.
No recovery action can be taken over a borrower’s main home or primary personal vehicle.
For sole traders or partnerships, who do not have the benefit of limited liability, other personal assets may be at risk of recovery action.
Is the loan available under the Bounce Back Loan Scheme a personal loan or a business loan?
A loan under the Scheme is a business loan. The terms of the loan are covered by the Scheme.
A lender may consider paying the funds into a personal current account if no business bank account is held, if the business has been satisfactorily evidenced.
Which businesses meet the “business in difficulty” criteria?
A business is considered in difficulty if met any one of the following criteria on 31 December 2019:
- Individuals or companies that have entered into collective insolvency proceedings;
- Limited companies which have accumulated losses greater than half of their share capital in their last annual accounts (this does not apply to SMEs less than 3 years old );
- Partnerships, limited partnerships or unlimited liability companies which have accumulated losses greater than half of their capital in their latest annual accounts (this does not apply to SMEs less than 3 years old);
- Where the undertaking has received rescue aid and has not yet reimbursed the loan or terminated the guarantee, or has received restructuring aid and is still subject to a restructuring plan;
- A company which is not an SME where, for each of the last two accounting years: i) your book debt to equity ratio has been greater than 7.5; and ii) your EBITDA interest coverage ratio has been below 1.0