The Bounce Back Loan Scheme, launched in May 2020, has been introduced to help smaller businesses impacted by coronavirus (COVID-19). It aims to assist businesses to borrow between £2,000 up to 25% of a business’ turnover (the maximum amount available is £50,000).
Government will cover any interest payable in the first 12 months through a Business Interruption Payment to the lender, and lenders benefit from a 100% government-backed guarantee.
The government has set the interest rate for this loan at 2.5% per annum and the repayment term is fixed at six years. No repayments are due during the first 12 months. Businesses remain 100% liable to repay the full loan amount, as well as interest, after the first year.
The Scheme is delivered through a network of accredited lenders.
Am I eligible? (updated 09 November 2020)
The Scheme is open to most businesses, regardless of turnover, who meet the eligibility criteria and who were established on or before 1 March 2020. Borrowers are required to declare, amongst other things, that:
- The business is engaged in trading or commercial activity in the UK at the date of the application, was carrying on business on 1 March 2020 and has been adversely affected by coronavirus (COVID-19).
- The business (and any wider group of which it is part, defined by having a holding company at the top of their structure) is not already in the process of applying for or has not already received a Bounce Back Loan Scheme facility.
- The business (and any wider group of which it is part, defined by having a holding company at the top of their structure) has not yet obtained a loan through either the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, or the Covid Corporate Financing Facility, unless that loan will be refinanced in full by the Bounce Back Loan Scheme facility.
- That the business is a company or limited liability partnership incorporated or established in the UK, or tax resident in the UK.
- The business is not a bank, building society, insurance company, public sector organisation, state-funded primary or secondary school, or an individual other than a sole trader or a partner acting on behalf of a partnership.
- Whether or not the business was, on 31 December 2019, a “business in difficulty” and does not breach State aid restrictions under the Temporary Framework; and if it was a “business in difficulty” then it must confirm it does not breach de minimis State aid restrictions and will not be used to support export-related activities.
- At the time of submitting their loan application, the business is neither in bankruptcy, liquidation or similar.
- More than 50% of the income of the business (together with that of any member of any group of which it is a part) is derived from its trading activity. This confirmation is not required if the borrower is a charity or a further education college.
- They will use the loan only to provide economic benefit to the business, and not for personal purposes. They have understood the costs associated with repayment of the loan and that they are able and intend to complete timely repayments in future.
The application form also requires confirmations to be given in relation to losses that may be incurred, impact on credit rating, financial risk to personal assets (other than primary residence and primary personal vehicle), reduced consumer protection provisions, data protection consents and that lenders will not assess affordability. Borrowers are advised that they should seek independent legal advice if they are in any doubt about the consequences of the loan agreement not being regulated by the Financial Services and Markets Act 2000 or the Consumer Credit Act 1974 or any other aspect of taking out a loan.
For some businesses, who self-declare as being a “business in difficulty” on 31 December 2019, there may be restrictions on the amount of finance they are allowed to borrow and what they can do with the loan .
Businesses which originally borrowed less than the maximum amount available to them under the Scheme may be eligible to top-up their original loan. Businesses will be required to fill out a separate application form, reaffirming the declarations made in the original application form. Businesses will only be able to make one top-up application.
Businesses are required to fill in a short online application form and self-declare that they are eligible for the Scheme.
In the first instance, businesses, where possible, should approach their own Bounce Back Loan Scheme accredited provider. They may also consider approaching other Scheme accredited providers if they are unable to access the finance they need or if their existing provider is not accredited to provide loans under the Scheme.
Businesses can apply for between £2,000 up to 25% of their turnover. The maximum loan available under the Scheme is £50,000. The government will cover the interest repayments for the first 12 months.
Businesses which originally borrowed less than the maximum amount available to them under the Scheme may be eligible to top-up their original loan. The original loan amount plus the top-up must not exceed 25% of the original self-certified annual turnover, or £50,000, whichever is lesser, irrespective of repayments a business may have made.
How long will it take me to get the funds?
The Scheme has been designed to enable businesses to access finance quickly. Businesses are required to complete an online application form, which is expected to be assessed by their lender within a matter of days.
In some instances, the lender may ask you for additional information, such as an HMRC self-assessment tax return. Applications from eligible borrowers will be subject to customer fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks.
What products are available under the Bounce Back Loan Scheme?
Accredited lenders are only permitted to provide term loans under the Scheme. The Scheme is targeted at supporting those businesses who need access to finance quickly and, therefore, requires lenders to offer a standard product.
For those seeking finance above £50,000, the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, or the Bank of England’s Covid Corporate Financing Facility scheme may be suitable.
Businesses seeking asset or invoice finance under £50,000 may be able to use existing accredited lenders under the Coronavirus Business Interruption Loan Scheme.
When do I have to start repayments? (updated 5 February 2021)
The borrower is 100% liable for repaying the loan and any interest. The government will cover interest payable to the lender for the first 12 months from the date when the original loan was drawn down. The borrower will then need to make full repayments (the loan and any interest) up to the end of the six-year term, as per their arrangement with the lender.
In addition, the Government has announced Pay As You Grow options for Bounce Back Loan Scheme borrowers to help businesses get back to regular trading. These options aim to give borrowers more time and flexibility to pay back their loan. For more information please visit: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/pay-as-you-grow/
How much am I meant to repay?
Businesses are not required to make repayments for the first 12 months but will still have to repay the loan and any interest after 12 months.
What checks will I be subject to?
Applicants are required to self-declare they meet the eligibility criteria for the Scheme. Applications from eligible borrowers will be subject to customer fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks.
What protections do I have under the Bounce Back Loan 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, in order 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 are removed. Lenders are 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.
In addition, lenders are not permitted to require personal guarantees for the Bounce Back Loan Scheme. For sole traders or small partnerships, who often risk their personal assets when borrowing, the terms of the Bounce Back Loan Scheme means no recovery action can be taken over a principal private residence or a primary personal vehicle.
What can I use the loan for?
The business must confirm to the lender that the loan will only be used to provide an economic benefit to the business, for example providing working capital, and not for personal purposes.
If the business was a “business in difficulty” on 31 December 2019, then a loan under the Scheme is not permitted to be used for export-related activities.
There are no limits on the amount of the facility that can be used for refinancing.
What happens if I find I’m struggling to repay the loan or need flexibility to repay the loan? (Updated 5 February 2021)
On 24 September 2020, the Chancellor announced new Pay as You Grow measures for borrowers who have accessed the Bounce Back Loan Scheme. The measures will provide borrowers with the option to:
• Extend the length of the loan from six years to ten, at the same fixed interest rate of 2.5%.
• Make interest-only payments for six months, with the option to use this up to three times throughout the term of the loan
• Request a six-month repayment holiday once during the term of the loan.
Businesses will be able to use these options either individually or in combination with each other, as well as having the option to fully repay their loan early and will face no early repayment charges for doing so. These will be standardised options available to all borrowers.
Lenders will start to communicate Pay as You Grow options to Bounce Back Loan Scheme borrowers three months before repayments commence. Lenders will inform their customers directly, so borrowers should wait until they are contacted by their lender before enquiring about their options.
For more information please visit: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/pay-as-you-grow/
Do you support all businesses?
The Scheme is open to most UK businesses, regardless of turnover, who self-declare they meet the eligibility criteria . For some businesses, who self-declare as being a “business in difficulty” on 31 December 2019, there may be restrictions on the amount of finance they are allowed to borrow and what they can do with the loan .
I have a number of businesses; under the Bounce Back Loan Scheme, can I apply for a loan for each business? (added 03 June 2020)
Businesses are entitled to one Bounce Back Loan Scheme facility per separate business unless the business is a group which has a holding company at the top of their structure.
Can I apply again if my application under the Bounce Back Loan Scheme has been declined or withdrawn?
If a business’ application is declined or withdrawn, then the business is able to make a further application under the Scheme to another accredited lender. Lenders are required to confirm that the first application has terminated without loan approval/drawdown, and this may require evidence to be provided by the business.
Can I apply for a CBILS facility as well as a Bounce Back Loan Scheme facility?
A business is not able to take out a Bounce Back Loan Scheme facility if they have been approved for a CBILS facility, and vice versa.
However, a business that has a CBILS facility can apply for a Bounce Back Loan Scheme facility if the Bounce Back Loan Scheme facility will refinance the CBILS facility in full. All accredited lenders who have approved CBILS loans so far will allow customers to refinance their loan into the Bounce Back Loan Scheme where appropriate, however, borrower protections under these schemes differ, and businesses should discuss these with their lender.
Will using Pay As You Grow affect my ability to obtain finance in the future?
Using Pay As You Grow will not in principle affect a business’s ability to obtain finance in the future. Pay as You Grow is designed to alleviate borrowers’ financial difficulty, even before it arises, by giving borrowers flexibility in meeting their repayment obligations. Using Pay as You Grow will not affect a borrower’s’ credit rating, but it may affect lenders’ future creditworthiness assessments.
For example, when considering a request for additional funding a lender will take into consideration incomings and outgoings, including existing debt repayments such as the Bounce Back Loan Scheme facility. It will also consider a business’s total debt exposure, which will again include the outstanding Bounce Back Loan Scheme facility. More information on Pay As You Grow is available.
What should I do if I am having difficulty accessing the Bounce Back Loan Scheme via a lender? (added 06 May 2020)
There is significant interest in the Bounce Back Loan Scheme and, in some cases, wait times may be required as a result. If this is the case, please be patient as lenders are working hard to respond to demand and to prioritise support where it is needed most.
Potential borrowers should approach their existing lender wherever possible so that demand can be managed evenly across the Scheme’s accredited lenders. Businesses should approach a lender directly, ideally via the lender’s website, as phone lines are likely to be busy and branches may not be able to handle enquiries in person.
You can check our list of accredited lenders here.
A lender may consider paying the funds into a personal current account if no business bank account is held, if the business has been satisfactorily evidenced.
Do I need a business current account before I can apply? (updated 27 May 2020)
The Bounce Back Loan Scheme does not mandate that the applicant must have a business relationship with the lender in order to receive a loan. Certain lenders may require that you enter into a business relationship with them before you can apply and, within their standard policies and terms and conditions of business, some lenders may not permit an existing customer to operate their business via a personal account. If a lender identifies during their standard Know Your Customer (KYC) and fraud checks that their existing customer is operating a business via a personal account, the lender may request that they convert to a business relationship in line with their standard policies. This is at the sole discretion of the lender. Please note that you may experience delays with your application if this happens, as some lenders may require the conversion to a business relationship to happen before they are able to undertake their standard KYC and fraud checks.
Under the Bounce Back Loan Scheme, a business, which originally borrowed less than the maximum amount available to them under the Scheme, may be eligible to top-up their original loan. The top-up will be available from several large lenders from 10 November, with other lenders anticipated to make the top-up available in due course.
For most businesses, the combined loan amount must not exceed 25% of the original self-certified annual turnover, or £50,000, whichever is lesser; however, businesses which have received aid under another Temporary Framework scheme or who originally self-declared as being a “business in difficulty”, may only be eligible for a lower maximum amount. The top-up to the loan must be for at least £1,000.
Businesses which have repaid their original loan are not eligible to apply for a top-up. A business can only make one top-up application and can only top-up their loan with the same lender from which they obtained their original loan. As with the original application, businesses will be subject to customer fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks.
The government will continue to cover any interest payable in the first 12 months through a Business Interruption Payment and businesses will not be required to make any repayments during the first 12 months. This 12-month period runs from the date the original loan was drawn down, and not from when the top-up was drawn down.
A business which is not eligible for a top-up to their original loan, or who has received a top-up loan and later decide they need more financing, is not able to apply for a further loan under the Scheme. Instead, they may be able to refinance under CBILS provided they are eligible. This will not count towards a lender’s CBILS refinancing limits.
Businesses are not permitted to access more than one of either the Bounce Back Loan Scheme, CBILS, CLBILS or the Covid Corporate Financing Facility (CCFF) scheme at the same time.
|CBILS||Bounce Back Loan Scheme|
|Guarantee||Provides the lender with a government-backed, partial guarantee (80%) against the outstanding guarantee facility balance (only principal). The portfolio cap has now been removed.||Provides the lender with a government-backed, full guarantee (100%) against the outstanding guarantee facility balance (both principal and interest), with no portfolio cap.|
|Guarantee fee for businesses||No fee.||No fee.|
|Fee charged to lenders for each facility||A fee is charged to lenders for each facility which makes use of the Scheme.||No fee to lenders.|
|Types of facility||Facilities available include term loans, overdrafts, invoice finance and asset finance facilities.||Term loan only.|
|Maximum and minimum value of facility||Following the launch of the Bounce Back Loan Scheme the minimum for term loans and overdrafts is £50,001. Lenders delivering asset or invoice finance facilities only will still be able to provide finance at less than £50,001. |
The maximum value of a facility provided under the Scheme is £5m.
|The minimum value of a loan provided under the Scheme is £2,000; the maximum is 25% of turnover up to a cap of £50,000.|
|Interest rate and fees set by lender||Interest and fees are set by accredited lenders and will vary by lender.||The interest is set by government at 2.5% per annum. No lender-levied fees.|
|Repayment terms||Repayment terms limited to a maximum of six years for term loan and asset finance facilities up to £5m. For overdrafts and invoice finance facilities, terms are up to three years.|
The government will make a Business Interruption Payment to the lender to cover first 12 months of interest and fees payable.
Principal repayment holidays are at the discretion of the lender.
|Repayment terms are six years, but there are no additional fees for early repayment charges.
The government will make a Business Interruption Payment to the lender to cover first 12 months of interest payable.
The borrower has a 12-month principal repayment holiday.
On 24 September 2020, the Chancellor announced new Pay as You Grow measures for borrowers to help with repayments. Lenders will communicate further detail to borrowers three months before repayments are due to commence.
|Refinancing||Re-financing limited to a maximum of 20% of a lenders’ total CBILS lending.||There is no restriction on the total amount of the facility that may consist of refinancing.|
|Assessment of affordability and viability||Businesses must:|
• Have a borrowing proposal which the lender would consider viable, were it not for the current pandemic
• Self-certify that it has been adversely impacted by the coronavirus (COVID-19)
• Not have been classed as a ”business in difficulty” on 31 December 2019, if applying to borrow £30,000 or more.
All lending decisions remain fully delegated to lenders.
|The borrower is required to self-declare they meet the eligibility criteria for the scheme.
Lenders do not have to assess a business’ affordability or viability. Lenders are not responsible for the borrower’s decision to borrow.
|Borrower’s protection||All existing statutory rights (for example, Consumer Credit Act and FCA protections) apply.||Not subject to the many of the usual consumer protections that apply to business lending under £25,000. Borrowers do not have the benefit of protection and remedies that would otherwise be available under the Consumer Credit Act 1974.|
|Businesses eligible||Available to UK-based businesses with annual turnover of up to £45m per year.|
Smaller businesses from all sectors can apply for the full amount of the facility. However, fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment.
|Available to most UK-based businesses, regardless of turnover.
If the business is a “business in difficulty” as of 31 December 2019 then businesses in agriculture, aquaculture or fisheries may not qualify for the full amount; and the loan cannot be used for export-related activities.
|Personal guarantees||No personal guarantees for any facilities below £250,000. Other forms of security may still be required by the lender.|
Security, including personal guarantees may still be required for facilities above £250,000 but they exclude a borrower’s main home; and recoveries are capped at a maximum of 20% of outstanding balance.
|No personal guarantees.
No recovery action can be taken over a borrower’s main home or primary personal vehicle.
For sole traders or partnerships, who do not have the benefit of limited liability, other personal assets may be at risk of recovery action.
What is the difference between Start Up Loans and the Bounce Back Loan Scheme?
The Bounce Back Loan Scheme is designed to help a wide range of businesses who were trading prior to 1 March 2020 and have been negatively impacted by COVID-19. The Start Up Loans Scheme is available to businesses who have been trading for less than two years including newer businesses who began trading after 1 March 2020.
The Start Up Loans Scheme supports these individuals by offering access to affordable government-backed finance of between £500 and £25,000 per owner (limited to £100,000 per business), at a fixed 6% interest per annum.
The Start Up Loans Scheme provides access to support during the application process, including help to create a business plan, as well as post loan support and mentoring which is provided by the Scheme’s delivery partners.
Businesses who were trading prior to 1 March 2020, are less than two years old and have been negatively impacted by COVID-19 can, subject to full Scheme eligibility, consider applying for both a Bounce Back Loan Scheme facility and a Start Up Loan. Borrower protection differs under the schemes and businesses should consider carefully the type of finance they require.
Existing Start Up Loans customers are also able to apply to borrow under the Bounce Back Loan Scheme.
What if I want to complain about my loan under the Bounce Back Loan Scheme?
If you need to make a complaint you have the option to contact the lender who will be able to give you details of their standards complaints process and, if you are not satisfied, you can contact the Financial Ombudsman Service.
Does this loan count towards my State aid allowance? (updated 09 November)
If the business self-declares as not being a “business in difficulty” on 31 December 2019, then any previous de minimis State aid does not impact a business’ eligibility for the Scheme.
Businesses are required to self-declare that, since 19 March 2020, they (including any business in their group and any business under common control) have not received more than £711,200 in State aid under the State Aid Temporary Framework (or £106,680 in the case of fisheries and aquaculture businesses, or £88,900 for agriculture businesses). This is the case for both the initial Bounce Back Loan Scheme application and any top-up application. If the business has received aid under another Temporary Framework scheme they will have been informed as to the amount in their scheme documentation.
If the business self-declares as being a “business in difficulty” on 31 December 2019, then additional de minimis State aid restrictions apply.
Lenders will provide documentation to the business setting out the amount of aid received when either the original loan or the top-up is approved.
- Individuals or companies that have entered into collective insolvency proceedings;
- Limited companies which have accumulated losses greater than half of their share capital in their last annual accounts (this does not apply to SMEs less than 3 years old  );
- Partnerships, limited partnerships or unlimited liability companies which have accumulated losses greater than half of their capital in their latest annual accounts (this does not apply to SMEs less than 3 years old);
- Where the undertaking has received rescue aid and has not yet reimbursed the loan or terminated the guarantee, or has received restructuring aid and is still subject to a restructuring plan;
- A company which is not an SME where, for each of the last two accounting years: i) your book debt to equity ratio has been greater than 7.5; and ii) your EBITDA interest coverage ratio has been below 1.0.
However, as part of the application form, businesses are also required to declare that their business together any businesses in their group and any business under common control, have not breached State aid limits.
Are there any restrictions on financial institutions applying for a loan under the Bounce Back Loan Scheme? (added 23 June 2020)
There are no restrictions under the rules of the Scheme relating to financial institutions applying for a loan. However, ring-fenced banks are prohibited from entering into certain types of transactions with financial institutions. In broad terms, “financial institutions” include investment firms, alternative investment fund managers, structured finance vehicles, credit institutions, certain types of insurance companies, Undertakings for the Collective Investment in Transferable Securities (UCITS) funds and financial holding companies.
Ring-fenced banks include Barclays Bank (UK) plc, Clydesdale Bank plc, Virgin Money plc, HSBC Bank (UK) ltd, Lloyds Bank plc, Bank of Scotland plc, National Westminster Bank plc, Royal Bank of Scotland plc, Coutts & Company, Ulster Bank ltd, Santander UK plc and TSB Bank plc.
The following trades and organisations are not eligible to apply: Banks, building societies, insurance companies; public-sector bodies; and state-funded primary and secondary schools.
For businesses who self-declare as a “business in difficulty” on 31 December 2019, then additional de minimis State aid restrictions apply. In these instances, fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment.
If a business applies for a top-up under the Scheme, then the 12-month period still only runs from the date the original loan was drawn down.
This 12-month period runs from the date the original loan was drawn down, and not from when any top-up was drawn down.
Borrowers are not allowed to use the loan in relation to the establishment and operation of a distribution or to other current expenditure linked to an export activity.
The following trades and organisations are not eligible to apply: Banks, building societies, insurers and reinsurers (but not insurance brokers); public-sector bodies; and state-funded primary and secondary schools.
For businesses who self-declare as a “business in difficulty” on 31 December 2019, then additional de minimis State aid restrictions apply. In these instances, fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment.
Under CBILS lenders are required, for example, to undertake checks on affordability and viability of a business; and so, applying for refinancing gives no guarantee of eligibility.
There may be additional restrictions for businesses who have received aid under another Temporary Framework scheme or who self-declare as being a “business in difficulty”.
SMEs are defined as a business with less than 250 employees and either (a) a turnover of less than £44.45m or (b) a balance sheet of less than £38.22m.