The government “Bounce Back” loan scheme is aimed at helping small businesses navigate the current crisis by providing up to £50k of easy to access loans.
This scheme was launched as an alternative to the CBILS scheme which many small businesses have had difficulty accessing due to the qualifying criteria and reluctance of banks to lend substantial amounts at a high risk level (notwithstanding the 80% government underwriting).
This scheme is designed to be far easier to access and some of the highlights are:
- Loans are a maximum 25% of 2019 turnover up to £50k.
- Loans are for terms up to 6 years with no repayments due within the first 12 months. The Winter Economy Plan outlined the ability to be able to extend these loans to up to 10 years to assist with their affordability
- The interest rate is set at 2.5% per annum
- You can apply for a Business Interruption Payment to cover your first year of interest, this is payable directly to the bank
- You can either get a Bounce Back loan or a CBILS loan - not both.
- If you already have a CBILS loan for £50k or less you are able to transfer this loan from CBILS to Bounce Back.
- Applications need to be made via your bank (or a third party if your bank is not a qualified lender).
- The list of qualifying lenders is the same as CBILS and can be found here.
- Loans should reach the business within days of the application being made.
- The deadline for applications has been extended to the 30th of November.
- Eligibility is “self-certified” both on turnover levels (which will drive the amount of loan you can access) and to confirm that the business was not an “undertaking in difficulty” as at 31 December 2019.
- “Undertaking in difficulty” is defined in EC legislation. If you want to read the full definition please refer to paragraph 2.2 here. Two key aspects to consider though are:
SMEs less than 3 years old cannot be considered to be an ‘undertaking in difficulty’
For companies older than 3 years, retained losses cannot exceed half of the combined share capital and share premium as at 31 December 2019.