Bounce Back Loan Scheme

Posted Monday 4th May 2020

In the latest step to help businesses which are being impacted by the COVID-19 pandemic, the government announced, on 27 April, a new government-backed loan scheme for small and medium businesses, trying to fill a gap left with the previously announced the Coronavirus Business Interruption Loan Scheme (CBILS).

The key characteristics of the Bounce Back Loans are as follows:

  • Loans amount between £2k and £50k (the maximum amount will be 25% of turnover)
  • Loans are 100% backed by the government
  • Lenders are not permitted to take personal guarantees or take recovery action over a borrower’s personal assets
  • Maximum duration is six years
  • Interest free for the first 12 months; no repayments will be due in that period either.
  • Most UK businesses which have been affected by the coronavirus will be eligible (certain exceptions such as banks, insurers, public sector bodies etc)
  • Loans to be administered by accredited banks and commercial lenders
  • Scheme open until 4 November 2020

Among the other points to note are that the borrower will be legally responsible for the decision to borrow the money – not the lender – and so the borrower will not have the usual consumer protections under the U.K. law.  And unlike the CBILS, the Bounce Back scheme does not require the lending bank to show the loan is affordable.

If you have already applied of a loan under the CBILS, you cannot apply for anther loan under the Bounce Back scheme, but you will be able to arrange with your lender to transfer a CBILS loan of up to £50,000 into the Bounce Back scheme instead.

Applications opened on May 4th (no Star Wars jokes please!) and the process is very simple with a short application form, which self certifies that your business is eligible for a loan, available on the participating lenders’ websites

The key message is that the Bounce Back scheme is targeted at supporting businesses that need access to finance really quickly – and so it has all been set up as a standardised product.  The initial response has been enthusiastic. The CBI’s chief economist stated that this “will be a lifeline to many small businesses and sole traders under pressure”.

This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.

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