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Coronavirus (COVID-19) Business Bounce Back Loan Scheme

07 May 2020
In this article we outline some of the main features of the UK government's recently launched business bounce back loan scheme which is designed to help small and medium sized UK businesses overcome the financial impacts of coronavirus (COVID-19).

Coronavirus (COVID-19) Business Bounce Back Loan Scheme

The Coronavirus (COVID-19) business bounce back loan scheme (the "Scheme") opened on 4 May 2020. 

The purpose of the Scheme is to help small and medium sized businesses affected by coronavirus (COVID – 19) access funding.

Under the Scheme, the UK government will provide lenders with a full (100%) guarantee of the balance outstanding of the loan.

Key features of the Scheme

The key features of the Scheme include the following:

  • Participating lenders can provide a six-year term loan from £2,000 up to 25% of a business’ turnover. The maximum loan amount is £50,000.
  • Borrowers will remain fully liable for the sum borrowed.
  • The UK government will cover the first 12 months of interest payments.
  • The borrower does not have to make any repayments for the first 12 months.
  • The term of the loan is six years with an early repayment option. Repayment fees are not applicable.
  • Lenders are not permitted to take personal guarantees in respect of any amount borrowed under the Scheme.
  • The interest rate for the facility is set at 2.5% per annum for the term of the loan.

The Scheme will be made available through a series of accredited lenders, the details of which are listed on the British Business Bank website.

Businesses eligible to apply under the Scheme

The following eligibility criteria apply to borrowers seeking to avail of the Scheme:

The prospective borrower is required to self declare to the lender that it:

  • has been impacted by the coronavirus (COVID-19) pandemic.
  • was not a business in difficulty at 31 December 2019.
  • is engaged in trading or commercial activity in the UK and was established by 1 March 2020
  • is not participating in a separate UK government financial support scheme such as: the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) or the Bank of England’s Covid Corporate Financing Facility Scheme (CCFF), unless the loan is to be used to refinance the relevant borrower's participation in such scheme.
  • 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.

It is important to note that the decision to grant credit remains at all times with the relevant lender.

The following are ineligible for the Scheme: 

  • credit institutions, insurers and reinsurers (but not insurance brokers);
  • building societies;
  • public-sector bodies;
  • further-education establishments, if they are grant-funded; and
  • state-funded primary and secondary schools.

If you would like any further information regarding the Scheme, please do not hesitate to get in touch with a member of the Banking team.

Further information

British Business Bank

Gov.uk

Further Reading

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