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Financial support for SMEs: the Bounce Back Loan Scheme (BBLS)

04 May 2020

100% Government-backed loans of up to £50,000 for small and medium businesses

The BBLS provides term loan facilities of up to £50,000 for up to six years to smaller businesses (SMEs) across the UK which are experiencing lost or deferred revenues as a result of COVID-19, leading to disruptions to their cashflow. 

This scheme is one of the Government’s initiatives to support businesses, enabling them to keep operating in the face of the global economic emergency brought on by coronavirus. 

Launched on 4 May 2020, the BBLS will be implemented through term loans, and the Government has urged lenders to make the loans as well-priced and simple to apply for as possible after some businesses struggled to access the Coronavirus Business Interruption Loan Scheme (CBILS). As with the CBILS, the BBLS provides the lender with a Government-backed guarantee, potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’ (although in the case of the BBLS, the Government has increased the guarantee to cover 100% of the underlying loan).

A business cannot apply if it is already claiming under the CBILS but an eligible business which has already received a term loan of up to £50,000 under the CBILS will have until 4 November 2020 to arrange to transfer it into the BBLS if it so wishes.

The Government will make a Business Interruption Payment (BIP) to cover the first 12 months of interest payments and lenders are not permitted to charge any fees.  Therefore, smaller businesses will not face any upfront costs and will benefit from lower initial repayments.

This scheme is available through 40+ participating commercial lenders, backed by the British Business Bank. The scheme is currently scheduled to be available until 4 November 2020.

Information on the scheme is available on the British Business Bank website HERE. 

Key Features

  • Up to £50,000 term loan facility: The maximum value of a facility provided to a business under the scheme will be £50,000 (or, if less, 25% of its turnover), with a minimum of £2,000.
  • Up to six year term: The term of the loan is up to six years but early repayment will be permitted with no early repayment fee.
  • 100% guarantee: The scheme provides the lender with a Government-backed guarantee against the outstanding facility balance, both capital and interest.
  • Interest rate: The interest rate for the loans is set at 2.5% per annum, giving all businesses access to the same low rate of interest.
  • Interest paid by Government for 12 months: The Government will make a BIP to cover the first 12 months of interest payments.
  • No fees: The Government will not charge a guarantee fee and lenders are prohibited from charging their own fee.
  • Liability: The borrowing business always remains 100% liable for the debt.

Eligibility

SMEs from (nearly) all sectors can apply for a loan under the BBLS. To be eligible for a loan, an SME must be able to self-certify that it:

  • is UK-based in its business activity and was trading on 1 March 2020;
  • has been adversely impacted by the coronavirus; and
  • was not an ‘undertaking in difficulty’ on 31 December 2019 (as defined in Article 2 (18) of the Commission Regulation (EU) no. 651/2014 of 17 June 2014).

Full details are found within the “Am I eligible?” FAQ HERE.

You are not eligible if you fall into any of the following categories of trades and organisations:

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

How to access the scheme

You should approach one of the British Business Bank’s 40+ accredited lenders, which are listed on the British Business Bank website HERE.

Make the approach via the lender’s website - In the first instance, you may find it quicker to approach your own provider. Then consider approaching other lenders if your own provider is unable to provide the finance you need. Ideally make the approach via the lender’s website. Telephone lines are likely to be busy and branches may not be able to handle enquiries in person.

The lender has the authority to decide whether to offer you finance. If one lender turns you down, you can still approach other lenders within the scheme.

Lenders range from high-street banks, to challenger banks, to asset-based lenders and smaller specialist local lenders.

To learn more about lenders’ requirements, see the Better Business Finance lending application checklist HERE.

Further information

Further information is available in the BBLS FAQs for SMEs document HERE.

Information on the application process can be found on the BBLS Business and Advisor’s page HERE

We consider it likely that this scheme may be adjusted from time to time - in particular, the list of accredited lenders is likely to be extended - so please do return to those website pages for updates.

You can read our article on the CBILS HERE and our article on the COVID-19 Corporate Financing Facility, providing financial support for larger firms, HERE.

You can read our article on the Coronavirus Large Business Interruption Loan Scheme (CLBILS) HERE.

All of our COVID-19 resources are available via our COVID-19 Hub HERE.

If you have any queries regarding this matter please contact either of the authors or another member of the Corporate team.

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