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Covid-19 update: Bounce Back Loan Scheme

Covid-19 update: Bounce Back Loan Scheme

The Chancellor has announced yet another support measure to bolster the existing range of COVID-19 loan and financial packages. Having come under pressure to increase the speed at which financial support reaches the business community, the Government yesterday announced the “Bounce Back Loan” scheme. Aimed at small and micro businesses, it comes with some significant points of difference to previously announced packages. The two noticeable differences are:

  • The Government will fully guarantee the loans, therefore banks and funders will not be exposed to any risk
  • Bounce Back Loans can be applied for online via a short form application process

The scheme has clearly been designed to facilitate support reaching businesses quickly, the expectation being that cash will be provided within a matter of days following application.

In summary:

  • The scheme will officially launch on Monday 4 May with online applications being taken the same day
  • Finance will be provided through any one of a number of accredited lenders
  • The standardised online application form will be self-certified by the Director(s)
  • Businesses will be able to borrow between £2,000 and £50,000
    • The maximum amount advanced will be capped at the lower of 25% of annual revenue and £50,000
  • Loans will be fee and interest free for the first 12 months
  • No capital repayments will be due during the first 12 months
  • Loan terms can be up to 6 years

To be eligible businesses must:

  • Be UK based
  • Have been negatively affected by the COVID-19 crisis
  • Not have been an “undertaking in difficulty” on 31 December 2019
  • Not have already applied for a loan under the Coronavirus Business Interruption Loan Scheme (CBILS)
    • however, businesses can speak to their lender about transferring a CBILS loan into the Bounce Back Loan scheme if the existing facility is less than £50,000

Whilst there will be no requirement to satisfy a forward looking viability test applicants will need to demonstrate viability prior to COVID-19. It is not yet clear what will be required from a practical perspective to satisfy this, the detail will of course become clearer once the application process is opened next week.

As with CBILS, the borrower will remain liable for the whole of the debt and so the Director(s) will want to satisfy themselves that they understand and are comfortable with the required repayments when they commence 12 months after drawing the loan.

We will update you with further information as it is released, but please get in touch with your usual contact at BHP if you have any questions or email info@bhp.co.uk