NEW GOVERNMENT BOUNCE BACK LOAN SCHEME
Many small and micro businesses have had difficulty in accessing the CBILS support, often because lenders were unwilling to take on their 20% risk value (the Government agreed to cover 80% of the risk value) and in consequence have either been offered lower loans than requested – or have had their application rejected entirely.
It is therefore good news that, following pressure from many sources, the Government has introduced a new fast-track financial support scheme, which it has called the Bounce Back Loan Scheme (BBLS).
BBLS will enable businesses to borrow between £2,000 and £50,000 and access the cash within days.
Loans will be interest free for the first 12 months, and businesses can apply online through a short and simple form that will be available from Monday 4 May 2020
Initial guidance says that the amount you can borrow will be based on your recent annual turnover. The loan value should be calculated at a maximum of 25% of your current actual turnover, up to the published maximum of £50,000.
You will not need to submit detailed forward cash-flow projections. This 25% maximum figure is currently issued as guidance; confirmation or alteration will be made next Monday.
The Government will provide lenders with a 100% guarantee for the loan and pay any fees and interest for the first 12 months.
No repayments will be due during the first 12 months and loan terms will be up to 6 years. The Government confirm that they “will work with lenders to agree a low rate of interest for the remaining period of the loan”.
When the scheme becomes operational next Monday, businesses will be able to access these loans through a network of accredited lenders 40 accredited lenders.
Lenders are most likely to fast-track these loans as they will simply have to administer them and with minimal financial risk to themselves.
The loans will be easy to apply for through a short, standardised online application form and, after Due Diligence and anti-fraud checks, money should reach businesses within 24 hours, helping many small enterprises to stay afloat.
You can apply for a loan if your business:
- Is based in the UK
- Has been negatively affected by Coronavirus
- Was not an ‘undertaking in difficulty’ on 31 December 2019
Who cannot apply:
The following businesses are not eligible to apply:
- Banks, insurers and reinsurers (but not insurance brokers)
- Public-sector bodies
- Further-education establishments, if they are grant-funded
- State-funded primary and secondary schools
If you’re already claiming funding:
You cannot apply if you’re already registered for and have accepted a loan under the Coronavirus Business Interruption Loan Scheme (CBILS).
If you’ve already received a loan of up to £50,000 under CBILS and would like to transfer it into the Bounce Back Loan Scheme, you can arrange this with your lender at any time until 4th November 2020.
If you have applied for a CBILS loan but not yet received and/or signed an acceptance form, you should be able to apply for a BBLS loan instead.
We strongly suggest you contact your current prospective lender immediately and ask for your CBILS application to be transferred to the BBLS – although they will not be able to act on this until Monday 4 May 2020.
As an example, one company with a verifiable turnover of £215,000 was offered (but has not yet signed and accepted) a CBILS loan of only £30,000 whereas under the current BBLS guidance they should qualify for a loan of the £50,000 maximum.
The Government confirms that asking for a transfer from CBILS to BBLS will not endanger any original CBILS offer that a lender has already made.
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