The Government’s new Bounce Back Loan Scheme (BBLS) has been launched to give smaller businesses a chance to get back on their feet in the midst of uncertain economic conditions caused by the current lockdown. The loan scheme allows businesses to borrow up to 25% of their turnover, with a max value of £50,000. While it is technically not limited to small businesses, the relatively low value of the loans available mean that it’s really aimed at smaller businesses and independent contractors.
One of the headline benefits of the Bounce Back scheme is the fact that there is no interest or fees to pay for the first year. And, even after those initial 12 months are up, an interest rate of 2.5% per year means that it is an incredibly competitive offer. The loan can be repaid over a maximum of six years, and there are no penalties for paying it back early.
Is my business eligible?
These loans are available to businesses in almost all sectors, but there are a few caveats and criteria to be aware of:
- The money is only available for businesses negatively impacted by the COVID-19 lockdown. If you were already in financial difficulty before the end of December 2019, then you’ll have to look at other sources of finance.
- It’s not available for people taking advantage of other COVID-19 specific government loans, such as the Coronavirus Business Interruption Loan Scheme, unless you wish to transfer the full balance of your existing loan to the new scheme.
- There are a few sector-specific exclusions, including all public-sector bodies, banks and insurance companies (but not insurance brokers).
- Your business must have been established before 1 March 2020, and more than half of your income should come from trading activity.
- Those who have registered as sole traders are eligible to apply, meaning that this scheme could be very helpful for self-employed people who are struggling to access other sources of financial support.
Accessing the money
If you want to apply for a loan then go to the government’s website for more information. The process is refreshingly simple: choose a suitable loan provider from their list of 11 accredited lenders – most of the big high street banks like Lloyds and HSBC are taking part – and fill out a short online form. Make sure you spend some time reading the full terms and conditions of the loan before deciding to go ahead.
In the 24 hours following the launch on 5 May, an enormous £2billion had already been secured by UK businesses. It’s clear that there is going to be a lot of interest from businesses that have had to close their doors in recent weeks, so you may need to be patient if it takes banks some time to sort through the applications.
Overall, this looks like a good opportunity for companies that need a bit of a boost. Although non-repayable grants are always the best option, a loan with such reasonable interest and repayment terms could be just the thing to bounce you back to your feet.