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Covid-19 Response: Bounce Back Loan Scheme (last updated 6 May 2020)

The Bounce Back Loan Scheme (BBLS) was announced on 27 April to provide loans for small and medium-sized businesses and went 'live' on 4 May. On day one of the scheme 70,000 applications were received and loans of £2.1 billion were approved, providing a major cash flow boost for small businesses, including a number of our clients.

The main features of these loans are as follows:

  • Loans available from £2,000 to £50,000 (capped at 25% of your business's turnover, most likely measured against the 2019 year)
  • Fully repayable by the borrower but 100% guaranteed by the government in the event of business failure
  • Interest free for 12 months, thereafter interest will be charged at 2.5%
  • No capital repayments for 12 months, following which the capital will be repaid by 60 monthly instalments (the loans therefore have a term of 6 years)
  • No early repayment charges (part early repayments are possible with some lenders)
  • No setup fees
  • No personal guarantees or other security required

This scheme acknowledges the difficulties that many small businesses have experienced in attempting to secure funding via the Coronavirus Business Interruption Loan Scheme (CBILS) and this was addressed by the introduction of a simplified online application (the applicant has to self-certify against the scheme conditions rather than provide cash flows and other evidence) with a decision within 24 hours, accessible in the first instance via your own business bank. Not every business bank is part of the scheme yet (11 have been approved so far), but others are being added. Feedback we have had so far has been that this process has been very straightforward.

To be eligible a business must meet the following criteria:

  • Be small or medium-sized (less then 250 employees)
  • Be based in the UK
  • Be trading and derives more than 50% of its income from this trading activity
  • Have been established before 1 March 2020
  • Have been negatively affected by the coronavirus pandemic but be continuing to trade or planning to do so once the situation allows it
  • Was not a 'business in difficulty' at 31 December 2019 (see below)
  • Not already be in receipt of a loan from CBILS (although a CBILS loan of up to £50k can be transferred to BBLS until 4 November 2020)

The 'business in difficulty' test has been used on some other support measures and is open to a number of interpretations. For the BBLS the guidance is provided by the British Business Bank and can be summarised as follows:

  • A business or individual that had entered into collective insolvency proceedings; or
  • A limited company which is more than 3 years old and which had negative reserves (accumulated accounting losses) which exceeded 50% of the company's share capital in their most recent annual accounts (for example if these showed a share capital of £10,000 and reserves of minus £6,000 then the company would be classed on this measure as a business in difficulty); or
  • Partnerships and LLPs more than 3 years old with accumulated losses greater than half of their capital in their most recent annual accounts; or
  • An undertaking which has received rescue aid and has not yet reimbursed the loan or terminated the guarantee.

Bear in mind when considering applying for a BBLS loan (or a CBILS one) that it is a loan and is therefore repayable by the business, including interest from month 13 onwards, so only apply for what the business needs and what it can afford to repay. While BBLS doesn't require the submission of projected profit and loss accounts or cash flows, it's always a good idea to prepare these so that you have a definite plan for the coming year(s) and can demonstrate that the borrowing requested is both adequate and affordable. Let us know if you'd like any help with this.

As always we will keep an eye on the official guidance and update this page as more details emerge.

April 28, 2020

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