What is it?
In light of recent pressure and feedback from small businesses that are continuing to struggle to access funding under the Coronavirus Business Interruption Loan Scheme, the Chancellor unveiled a new Bounce Back Loan to go live on Monday 4th May.
This scheme will provide 100% government-backed loans for small businesses of 25% of their revenue, up to £50,000, within 24-48 hours of applying. As per the CBILS initiative, the term will be six years but there will be no capital repayments due for the first year and the government will pay the interest in that time. Interest from the second year onwards has been announced as 2.5%.
How to apply.
Applications will continue to be made through the business’s existing bank in the first instance, as long as they are accredited under the scheme.
Crucially, applicants will only have to prove that they were viable before the Coronavirus crisis rather than proving that they will be after the crisis, at a point where there is much uncertainty. The application process has been streamlined to reduce delays, with only a two-page self-certification online form required.
The loan details.
The main points relating to the Bounce Back Loan scheme are as follows:
- 100% Government-backed
- Loans of up to £50,000 are available, can’t exceed 25% of revenue
- Loan term will be six years
- No capital repayments due for 12 months
- The government pays interest for the first 12 months
- Interest thereafter of 2.5% per annum
- Streamlined two-page application process
- Applicants only need to evidence viability pre-Coronavirus
How does it support businesses?
The 100% government backing is being welcomed by banks as they have voiced concerns that they have to maintain a certain level of processes, at a time with reduced staff and increased demands, to ensure that usual lending parameters are met. Reducing their risk exposure allows them to loosen their procedures and increase turnaround times.
The scheme overall has been praised by lenders, businesses owners and industry bodies alike, who had all previously voiced concerns about the delays in accessing funds under other initiatives but now agree that this provides a framework to help those businesses quickly and fairly.
How to apply
If you are interested in applying for a bounce back loan then we recommend speaking with your bank in the first instance. If that route is not available, book a call with our COVID-19 Task Force to see what else might be available to you…