Have you heard about the Government’s Bounce Back Loan Scheme?

The Government has recently announced the introduction of its Bounce Back Loan Scheme (BBLS) which was launched at 9am on 4 May 2020.  This is part of a wider package of Government support for UK businesses and employees.   The aim of the BBLS is to provide financial support to businesses across the UK that are losing revenue, experiencing disruption to cash-flow all caused by the current Covid-19 pandemic.

Small businesses such as hairdressers, coffee shops, florists and sole traders will be eligible for 100% Government-backed bounce back loans to help them during the current Covid-19 outbreak.   The scheme was launched at 9am on 4 May 2020 and small business owners can apply to accredited lenders by filling out a simple form online which has 7 questions.  These include company number, address, turnover, bank account details and the amount the business would like to borrow.

How does the BBLS work?

BBLS is available and is being delivered through a variety of British Business Bank accredited lenders and partners, and they can be found on the British Business Bank Website which can be found in the link below:-

The Bounce Back Loan scheme helps small and medium-sized businesses to borrow between £2,000 and £50,000.   The amount of the loan can be up to 25% of business turnover but the amount that can be borrowed is capped at £50,000.

The government guarantees 100% of the loan and there will not be any fees or interest for the borrower to pay for the first 12 months.  The overall interest rate thereafter will be at a flat rate of 2.5% that will be charged on such loans.  Any business that has already taken out a Coronavirus business interruption loan of £50,000 or less can also apply to have these switched over so that they benefit from this more generous level of interest rate.

Loan terms will be up to 6 years. No repayments will be due during the first 12 months. The government will work with lenders to agree a low rate of interest for the remaining period of the loan.

What is interesting about the BBLS is that the scheme provides the lender with a full 100% government backed guarantee against the outstanding balance of the finance (both capital and interest repayments).  The borrower however remains liable for 100% of the debt.

Although the length of the loan is up to six years, early repayment of the loan is permitted without any early repayment penalties and there is no joining fee to access the scheme.

In the event that the borrower defaults on repayments, it is clear that lenders will not be permitted to take personal guarantees or take recovery action over the borrower’s personal assets such as their main home or personal vehicle.

Most small businesses are eligible for the BBLS however the following businesses are not eligible to join the scheme:-

  • banks, insurers and reinsurers (but not insurance brokers)
  • public-sector bodies
  • state-funded primary and secondary schools

Eligible businesses will still be subject to standard customer fraud, anti-money laundering (AML) and Know your Customer (KYC) checks prior to any loan being made.

At the time of writing more than 100,000 applications have been made on the first day of the launch of the BBLS with the vast majority of applications being approved by banks.  RBS  – one of the biggest SME lenders by volume said that it had received 30,000 applications on the first day of the launch, with Lloyds approving 26,500 applications, Santander approving 18,000, and Barclays 6,000.  Some 200 businesses had also received the payment into their bank account at close of business on 4 May 2020.

If you have any employment and business concerns then contact Steven Eckett, Partner and Head of Employment at Meaby & Co LLP, seckett@meaby.co.uk and Telephone: 020 7703 5034.