New bounce back loan scheme opens today

Following the Chancellor of the Exchequer’s announcement on 27 April, the Bounce Back Loan Scheme opened for applications this morning.

The scheme is for small and micro businesses in all sectors, providing loans from £2k up to 25% of the business’ turnover, with a maximum loan of £50k.

Scheme features

  • The Bounce Back Loan Scheme enables businesses to obtain a six-year term loan at a government set interest rate of 2.5% a year. The government will cover interest payable in the first year.
  • Up to £50,000 loan: Loans will be from £2,000 up to 25% of a business’ turnover or £50,000, whichever is lower.
  • 100% guarantee: The scheme provides the lender with a government-backed, full guarantee (100%) against the outstanding facility balance, both capital and interest. The borrower always remains 100% liable for the debt.
  • Interest rate: The government has set the interest rate for this facility at 2.5% per annum, meaning businesses will all benefit from the same, low rate of interest.
  • Interest paid by government for 12 months: The government will make a Business Interruption Payment to the lenders to cover the first 12 months of interest payable, so businesses will benefit from no upfront costs.
  • No principal repayments for first 12 months: Borrowers will not have to begin principal repayments for the first 12 months, thereafter capital will be repaid on a straight line basis.
  • No guarantee fee for businesses or lenders to access the scheme.
  • Finance terms: The length of the loan is for six years but early repayment is allowed, without early repayment fees.
  • No personal guarantees: No personal guarantees are allowed, and no recovery action can be taken over a principal private residence or principal private vehicle.
  • Fast access to funds: According to today's FT, if the loan comes from your existing bank, funds could be made available within just a few days. If you're applying to a new bank, it may take a little longer.

Eligibility criteria

In order to be eligible, a business must self-certify to its lender the following:

  • Confirm it is UK-based in its business activity, and established by 1 March 2020
  • Confirm it has been adversely impacted by the Coronavirus 
  • Confirm it is not currently using a government-backed Coronavirus loan scheme (although if you’ve already received a loan of up to £50,000 under CBILS and would like to transfer it into the Bounce Back Loan scheme, you can arrange this with your lender until 4 November 2020)
  • Confirm it is not in bankruptcy, liquidation or undergoing debt restructuring

How to apply

You need to apply directly to one of the approved lenders, such as your bank.

Here is a list of lenders currently providing Bounce Back Loans.

 Read the FAQs here