On 27th April, the Chancellor announced a new 100% government backed loan scheme for small businesses.
This page was updated on 8 February 2021.
*The government has extended the deadline for new applications to 31 March 2021*
What is it?
The BBLS was announced on 27th April 2020 and is a scheme aimed at micro businesses which are experiencing lost or deferred revenues as a result of the COVID-19 outbreak. It is designed to provide debt finance of between £2k and £50k. The scheme has gone live and a list of accredited lenders can be found here.
If you need advice on BBLS or any other source of finance, businesses located across Greater Manchester and Lancashire can obtain fully-funded financial advice from the Growth Hub’s Access to Finance team.
What are the main points?
- Loans range from £2,000 up to 25% of a business’ turnover. The maximum loan amount is £50,000.
- The scheme provides the lender with a full (100%) government-backed guarantee against the outstanding balance of the finance (both capital and interest).
- The borrower remains 100% liable for the debt.
- The Government will make a Business Interruption Payment (BIP) to cover the first 12 months of interest payments.
- The borrower does not have to make any repayments for the first 12 months.
- The interest rate for the facility is set at 2.5% per annum, meaning businesses will all benefit from the same, affordable rate of interest.
- Lenders are not permitted to take personal guarantees or take recovery action over a borrower’s personal assets (such as their main home or personal vehicle).
- There is no fee to access the scheme for either businesses or lenders.
- Businesses can apply for a BBLS facility to refinance a CBILS facility if the BBLS facility will refinance the CBILS facility in full.
- If a business already has a Bounce Back Loan but has borrowed less than what it was entitled to, it can top up its existing loan to its maximum amount. The top-up must be requested by 31 March 2021.
Changes to the repayment terms:
- Loans can be extended from six to ten years at the same fixed interest rate of 2.5%.
- Businesses can choose to make interest-only payments for periods of up to 6 months. This option can be used up to three times throughout the term of the loan.
- Businesses can also choose to pause repayments altogether for up to six months. On 8 February 2021, the government extended the flexibility of this option, which will now be available to all from their first repayment, rather than after six repayments have been made (this option can only be used once).
Businesses can use these options either individually or in combination with each other.
Note: Businesses should be aware that if they use one or more of these options they will pay more interest overall. In addition, the length of the loan will increase in line with any repayment holidays taken.
How can I access the Pay As You Grow scheme?
Lenders will inform their customers about the scheme directly three months before repayments are expected to commence. This means that businesses should wait until they are contacted by their lender before enquiring about their options.
Is my business eligible to apply for a Bounce Back Loan?
Your business must be able 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 (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 using 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 Bounce Back Loan will refinance the whole of the CBILS, CLBILS or CCFF facility
- is not in bankruptcy or liquidation 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)
- is not in a restricted sector (see below)
Note: The above is not an exhaustive list – see the British Business Banks' Frequently asked questions for more information.
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
How do I apply?
- In the first instance, you should approach your own provider. You may also consider approaching other lenders if you are unable to access the finance you require.
- 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 (AML) and Know Your Customer (KYC) checks. Some state aid restrictions may apply to your application.
- The lender has the authority to decide whether to offer you finance.
- Under the scheme, lenders are not permitted to:
- take any form of personal guarantee
- take recovery action over a borrower’s personal assets
- If one lender turns you down, you can still approach other lenders within the scheme. If you have been unable to access Bounce Back Loans (BBLS) through your current banking partner, and are based in and trading from Greater Manchester, GC Business Finance (GCBF) may be able to support you. In November, GCBF became the first lender in the UK accredited to provide BBLS to be backed by a local authority, managing £10m of emergency funding from Greater Manchester Combined Authority (GMCA).
BBLS is designed to be fast for lenders to process and quick and easy for businesses to access. To help achieve this, the government has stated that you will only be required to fill out a short application form online, which is expected to be assessed by the lender within a matter of days.
What protections do I have under the 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, 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 will be removed. Lenders will be 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.
If the BBLS is not the right option for your business, you can find further forms of financial support here.
The information provided is meant as a general guide only rather than advice or assurance. GC Business Growth Hub does not guarantee the accuracy or completeness of this information and professional guidance should be sought on all aspects of business planning and responses to the coronavirus. Use of this guide and toolkit are entirely at the risk of the user. Any hyperlinks from this document are to external resources not connected to the GC Business Growth Hub and The Growth Company is not responsible for the content within any hyperlinked site.