Updated on 5 May 2020
Thousands of small firms and sole traders are eligible for 100% government-backed bounce back loans of between £2,000 and £50,000 to help them make it through the coronavirus outbreak.
From 9am yesterday, small business owners can apply to accredited lenders by filling out a simple online form, with just seven questions. The government has also agreed with lenders that a flat rate of 2.5% interest will be charged on these loans.
Any business that has already taken out a coronavirus business interruption loan (CBIL) of £50,000 or less can apply to have this switched over to this new scheme.
The government will provide lenders with a 100% guarantee and cover the cost of any fees and interest for the borrower for the first 12 months. No repayments will be due during this period to enable firms to get back on their feet.
Eligible companies will be subject to standard customer fraud, anti-money laundering (AML) and know your customer (KYC) checks prior to any loan being made. Some state aid restrictions may apply to application, the government said, and pointed out the borrower always remains 100% liable for the debt.
Two significant areas of difference between a Bounce back loan and Coronavirus Business Interruption Lending Scheme (CBILS) are the use of personal guarantees and affordability rules. Businesses that apply for a Bounce-back loan can do so without the need to use personal guarantees and will not need to meet any affordability requirements. However, they will be responsible for the decision to borrow the money and not the lender. This means that businesses will not have the usual consumer protections available to them for loans under £25,000. They will also not benefit from protection under the Consumer Credit Act 1974.
Eligible business must be based in the UK and established by 1 March 2020. They will need to generate at least 50% of their income from trading activity and show that this has been disrupted due to Coronavirus.
Businesses cannot have been in difficulty on 31 December 2019 and cannot be in bankruptcy or liquidation at the time of applying for a Bounce back loan.
The scheme currently has the following lenders, with the British Business Bank stating they are accepting applications from new lenders to become accredited to the scheme.
- Clydesdale Yorkshire Bank Group
- Danske Bank
- Lloyds Bank
- Royal Bank of Scotland
- Ulster Bank
The scheme is currently available until 4 November 2020, the Government has the option to extend this.