The Bounce Back Loan Scheme for Small businesses

The UK’s biggest banks have said they will ease their lending conditions via the bounce back loan scheme to make it easier for small businesses to access cash through the coronavirus business loan schemes, after chancellor Rishi Sunak offered 100 per cent guarantees to the smallest businesses.

 The coronavirus business interruption loan scheme (CBILS) has been criticised by many firms who have said banks have been too demanding.

Key points of the new bounce back loan scheme

  • businesses will be able to borrow between £2,000 and £50,000 (limited to 25% of turnover)
  • access to the cash within days
  • loans will be interest free and payment  free for the first 12 months
  • businesses can apply online through a short and simple form
  • loan length can be up to six years, and there will be no early repayment charges
  • no personal guarantees or security

Small businesses will benefit from a new fast-track finance scheme providing loans with a 100% government-backed guarantee for lenders.

Why is this being offered?

Rishi Sunak said the new Bounce Back Loans scheme, which will provide loans of up to £50,000, would help bolster the existing package of support available to the smallest businesses affected by the coronavirus pandemic.

The scheme’s design ensures that small firms who need vital cash injections to keep operating can get finance in a matter of days.

The government, which has been consulting extensively with business representatives about the design of the new scheme, will provide lenders with a 100% guarantee for the loan and pay any fees and interest for the first 12 months. No repayments will be due during the first 12 months.

The loans are designed to be easy to apply for through a short, standardised online application. The loan should reach businesses within days- providing immediate support to those that need it as easily as possible.

Rishi Sunak, said:

“Our smallest businesses are the backbone of our economy and play a vital role in their communities. This new rapid loan scheme will help ensure they get the finance they need quickly to help survive this crisis”.

Other help available

The ‘Bounce Back Loan Scheme’ is another support measure for UK business.  This is in addition to the  business grants, tax deferrals, and the job retention scheme.

The scheme will launch for applications on Monday 4 May. Firms will be able to access these loans through a network of accredited lenders.

The government will work with lenders to ensure loans through this scheme are avaialble as quickly as possible.  They will agree a low standardised level of interest (around 2.5%) for the remaining period of the loan.

Chairman of the Federation of Small Businesses, Mike Cherry, said:

“The decision by the chancellor to listen to our recommendation for a 100% guarantee on smaller loans, alongside the creation of a new fast-track system for those applying for them, will give hope to thousands of businesses”.

For more information, or to discuss whether the bounce back loans are right for your business, please do contact us.

Bounce back loan