Bounce Back Loan Scheme (BBLS)
The Bounce Back Loan Scheme (BBLS) is ending on 31st March 2021!
The BBLS will offer loans from £2,000 up to 25% of a business turnover or £50,000, whichever is lower. On 2 November, the BBLS rules were amended to allow businesses who borrowed less than their maximum to top-up their existing loan, businesses are able to take up on this option once so you haven’t done so already this can be a quick way to get some essential funds into the business.
The Government is providing lenders with a 100% guarantee for the loan and to pay any fees and interest for the first 12 months. After the first year, the government has set the interest rate at 2.5% per annum for subsequent years. No repayment will be due during the first 12 months. The length of the loan will be 6 years with now the ability to extend this to 10 years with the recent Pay As You Earn Scheme (check out our blog for more info) which essentially cuts payments to nearly half and have access to payment holidays and interest only periods.
Am I eligible?
Your business must be able to self‑declare to the lender that it:
- has been impacted by the Coronavirus pandemic.
- was not a business in difficulty at 31 December 2019 (if it was, you must confirm your business complies with additional state aid restrictions under de minimis state aid rules).
- is engaged in trading or commercial activity in the UK and was established by 1 March 2020.
- is not currently using a government-backed Coronavirus loan scheme, unless the Bounce Back Loan will refinance the whole of the CBILS, CLBILS or CCFF facility.
- is not in bankruptcy or liquidation or undergoing debt restructuring at the time it submits its application for finance.
- derives more than 50% of its income from its trading activity (this requirement does not apply to charities or further-education colleges).
Bounce Back Loans are available to businesses in all sectors, except the following:
- Credit institutions (falling within the remit of the Bank Recovery and Resolution Directive)
- Insurance companies
- Public-sector organisations
- State-funded primary and secondary schools
The borrower remains fully liable for the debt.
Who cannot apply
Businesses from any sector can apply, except:
- Banks, insurers and reinsurers (but not insurance brokers)
- Public-sector bodies
- State-funded primary and secondary schools
You cannot apply if you are already claiming funding under
- Coronavirus Business Interruption Loan Scheme (CBILS)
- Coronavirus Large Business Interruption Scheme (CLBILS)
- COVID-19 Corporate Financing Facility
If you have already received a loan of up to £50,000 under one of these schemes you can transfer it into the Bounce Back Loan scheme. You have until 31 March 2021 to arrange this with your lender.
What do I need to do to access it?
There are 29 lenders participating in the scheme. You will need to fill in a short application form online, which self-certifies that your business is eligible for a loan under BBLS. If your business is eligible, it will be subject to appropriate customer fraud, Anti-Money Laundering and Know Your Customer checks. The lender will decide whether to offer a loan or another type of finance and you will be responsible for repaying 100% of the amount borrowed.
Who do I need to speak to?
You should speak to your business banking provider or one of the accredited lenders. With high demand for BBLS facilities, finance providers recommend that you approach a lender via their website. We can speak to our partners to see what is available but due to the deadline fast approaching, you will have to be quick!
1. How long will it take me to get the funds?
The Scheme has been designed to enable businesses to access finance quickly. Businesses are required to complete an online application form, which is expected to be assessed by their lender within a matter of days.
In some instances, the lender may ask you for additional information, such as an HMRC self-assessment tax return. Applications from eligible borrowers will be subject to customer fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks.
2. What products are available under the Bounce Back Loan Scheme?
Accredited lenders are only permitted to provide term loans under the Scheme. The Scheme is targeted at supporting those businesses who need access to finance quickly and, therefore, requires lenders to offer a standard product.
For those seeking finance above £50,000, the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, or the Bank of England’s Covid Corporate Financing Facility scheme may be suitable.
Businesses seeking asset or invoice finance under £50,000 may be able to use existing accredited lenders under the Coronavirus Business Interruption Loan Scheme.
3. When do I have to start repayments? (updated 5 February 2021)
The borrower is 100% liable for repaying the loan and any interest. The government will cover interest payable to the lender for the first 12 months from the date when the original loan was drawn dow. The borrower will then need to make full repayments (the loan and any interest) up to the end of the six-year term, as per their arrangement with the lender.
In addition, the Government has announced Pay As You Grow (PAYG) options for Bounce Back Loan Scheme borrowers to help businesses get back to regular trading. These options aim to give borrowers more time and flexibility to pay back their loan. For more information please visit our blog on PAYG.
4. What fees and interest will I be required to pay?
The government has set the interest rate for this facility at 2.5% per annum. Lenders are not permitted to charge any fees.
5. What term can I borrow this over?
Loans under the Bounce Back Loan Scheme are available over a fixed six-year term. Again PAYG can extend your BBL to 10 years plus other options are available listed in the blog.
6. How much am I meant to repay?
Businesses are not required to make repayments for the first 12 months but will still have to repay the loan and any interest after 12 months.
7. Can I repay Bounce Back Loan early?
Early repayment is permitted at any stage, without early repayment fees.
8. What checks will I be subject to?
Applicants are required to self-declare they meet the eligibility criteria for the Scheme. Applications from eligible borrowers will be subject to customer fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks.
9. What protections do I have under the Bounce Back Loan Scheme?
For lending outside the Bounce Back Loan Scheme, the Consumer Credit Act ordinarily requires lenders to provide sole traders, small partnerships and unincorporated associations seeking finance up to £25,000 with information before a loan is granted, and to provide further information throughout the course of the agreement. If the lender does not comply with these rules, they ordinarily lose their ability to collect repayments on the loan.
However, in order for the application process to be as fast as possible, those provisions of the Consumer Credit Act will not apply to the Scheme, although not all protections are removed. Lenders are required, under the rules of the Bounce Back Loan Scheme, to provide relevant information to businesses; and the collection of these loans will be regulated, meaning that, should businesses encounter financial difficulty, lenders will have to comply with relevant regulations.
In addition, lenders are not permitted to require personal guarantees for the Bounce Back Loan Scheme. For sole traders or small partnerships, who often risk their personal assets when borrowing, the terms of the Bounce Back Loan Scheme means no recovery action can be taken over a principal private residence or a primary personal vehicle.
10. What happens if I find I’m struggling to repay the loan or need flexibility to repay the loan? (Updated 5 February 2021)
For more information please visit our blog on PAYG.
11. I have a number of businesses; under the Bounce Back Loan Scheme, can I apply for a loan for each business?
Businesses are entitled to one Bounce Back Loan Scheme facility per separate business unless the business is a group which has a holding company at the top of their structure.
12. Can I apply again if my application under the Bounce Back Loan Scheme has been declined or withdrawn?
If a business’ application is declined or withdrawn, then the business is able to make a further application under the Scheme to another accredited lender. Lenders are required to confirm that the first application has terminated without loan approval/drawdown, and this may require evidence to be provided by the business.
13. Can I apply for a CBILS facility as well as a Bounce Back Loan Scheme facility?
A business is not able to take out a Bounce Back Loan Scheme facility if they have been approved for a CBILS facility, and vice versa.
However, a business that has a CBILS facility can apply for a Bounce Back Loan Scheme facility if the Bounce Back Loan Scheme facility will refinance the CBILS facility in full. All accredited lenders who have approved CBILS loans so far will allow customers to refinance their loan into the Bounce Back Loan Scheme where appropriate, however, borrower protections under these schemes differ, and businesses should discuss these with their lender.
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