How to access the Bounce Back Loan Scheme

The Bounce Back Loan Scheme (BBLS) is designed to have a straightforward application process and provide quick access to funds, offering much-needed and timely support to UK businesses.

The Bounce Back Loan Scheme opened for applications in May through a network of the British Business Bank’s accredited lenders. There are currently twenty-eight lenders accredited to offer loans under the BBLS.

Businesses are required to complete an online application form which should be assessed by the lender within a couple of days.

Key features of the BBLS facilities are as follows

• Loans range from £2,000 up to £50,000, or up to 25% of your annual turnover if lower.
• The Scheme provides the lender with a Government-backed guarantee (100%) against the outstanding facility balance. Businesses remain liable to repay the full loan amount plus interest after the first 12 months.
• The Government will make a Business Interruption Payment to cover the first 12 months of interest payment and no repayments will be due during the first 12 months.
• Lenders will not take personal guarantees of any form for BBLS facilities, but other forms of security may be required by the lender. For sole traders or small partnerships, the terms of the BBLS mean no recovery action can be taken over a principal private residence or primary personal vehicle.
• The BBLS offers term loans only with an interest rate of 2.5% which has been set by the Government.
• Repayment terms can now be up to ten years and there will be no additional fees for early repayments. Existing loans made under the scheme with a six-year loan term can now be extended to ten years, nearly halving average monthly repayments.
• Businesses can choose to make interest-only payments and if required can apply to suspend repayments for six-months without any impact on their credit rating.
• The BBLS is initially open for applications until 30 November 2020.
• Lenders do not have to assess a business’ affordability or viability.
• Lenders are not responsible for the borrower’s decision to borrow.

Eligibility criteria for the BBLS

• The Scheme is open to UK-based businesses, regardless of turnover.
• The business must have been established by 1 March 2020 and must generate more than 50% of its turnover from trading activity.
• Almost all business sectors will be eligible for a loan under the BBLS other than banks, building societies, insurance companies, public sector organisations, and state-funded primary or secondary schools.
• The business will need to self-certify it is eligible to apply under the Scheme, and this will include the following declarations:

1. The business is trading in the UK and has been adversely affected by Coronavirus.
2. The business (and any group of which it is part) has not already received, and is not in the process of applying for, a loan under the BBLS.
3. The business is a UK limited company or partnership, or tax resident in the UK. The business will use the loan only to provide economic benefit to the business, and not for personal purposes.
4. 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. If it was a ‘business in difficulty’ then it must confirm it does not breach de minimis State aid restrictions and the loan will not be used to support export-related activities. See below for further details regarding the definition of ‘business in difficulty’.
5. At the time of submitting their loan application, the business is neither in bankruptcy, debt restructuring proceedings, liquidation or similar.
6. That the business understands the costs associated with repayment of the loan and that they are able and intend to complete timely repayments in future.

Protection for your business under the Bounce Back Loan Scheme

In order for the application process to be as fast as possible, certain provisions of the Consumer Credit Act will not apply to the Scheme.

Ordinarily lenders are required to provide sole traders, small partnerships and unincorporated associations seeking finance up to £25,000 with certain 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, the lender may lose their ability to collect repayments on the loan. These requirements do not apply for loans provided using the BBLS.

What is a ‘business in difficulty’?

A business is considered “in difficulty” if it meets any one of the following criteria on 31 December 2019:

• Individuals or companies that have entered into collective insolvency proceedings
• Limited companies 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 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) book debt to equity ratio has been greater than 7.5; and
  ii) your EBITDA interest coverage ratio has been below 1.0

Would you like to know more?

If you would like to discuss any of the above guidance or have other queries about how you can make the right decisions for the future of your business and your income, please contact your usual Blick Rothenberg contact or one of the partners to the right.

You can also visit our Coronavirus – Practical Guidance for businesses today Hub for our latest insights and sign up here to receive important Practical Guidance updates delivered directly to your inbox.