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Bounce Back Loan

Please find below the latest information available on the ‘Bounce Back Loan Scheme’.

Available to:

  • Smaller Limited Companies, Partnerships and Sole Traders.
  • Looking for between £2,000 and £50,000
  • No set up fees and first 12 months is interest on capital repayment free.  Term of loan is 6 years.

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 yet obtained a loan through either the Coronavirus Business Interruption Loan Scheme, the Conavirus 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
  • 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.
  • More than 50% of the income of the business is derived from its trading activity.
  • 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.

How do I apply?
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.

The Scheme will be available through the British Business Bank’s accredited lenders.

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.

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 protections do I have under the Bounce Back Loan Scheme?
For lending outside the Bounce Back Loan Scheme, the Consumer Credit Act ordinarily requires lenders to provide sole traders, small partnerships and unincorporated associations seeking finance up to £25,000 with information before a loan is granted, and to provide further information throughout the course of the agreement.  If the lender does not comply with these rules, they ordinarily lose their ability to collect repayments on the loan.

However, in order for the application process to be as fast as possible, those provisions of the Consumer Credit act will not apply to the Scheme, although not all protections will be removed.  Lenders will be required, under the rules of the Bounce Back Loan Scheme, to provide relevant information to businesses; and the collection of these loans will be regulated, meaning that, should businesses encounter financial difficulty, lenders will have to comply with relevant regulations.

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.

What happens if I or my company default on the loan?
Your lender will seek repayment of 100% of the outstanding loan from the Government.

H.M. Revenue and Customs will run retrospective checks on applications as part of efforts to minimise fraud. These will be far more likely if applicants default on repayments and trigger the Government guarantee.

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.

Please do not hesitate to contact us on 01384 376964 for more information