What is the Bounce Back Loan Scheme?
The Bounce Back Loan Scheme is a new scheme introduced to help smaller businesses impacted by coronavirus (COVID-19). It aims to assist those 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 will 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 will be 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 will be delivered through a network of accredited lenders.
Am I eligible?
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.
How do I apply?
The Scheme will be available through the British Business Bank’s accredited lenders. A list of lenders is available here.
Businesses will be 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.
How long is the Scheme open?
The Scheme is intended to be a temporary response to the unprecedented challenges to businesses as a result of coronavirus (COVID-19). The Scheme will initially open until 4 November 2020, with the government retaining the right to extend this.
How much can I apply for?
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.
The government-backed guarantee on the loan is a guarantee to lenders. Businesses remain 100% liable to repay the full loan amount, as well as interest, after the first year.
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?
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. 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.
What fees and interest will I be required to pay?
The government has set the interest rate for this facility at 2.5% per annum. Lenders are not permitted to charge any fees.
What term can I borrow this over?
Loans under the Bounce Back Loan Scheme are available over a fixed six-year term.
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.
Can I repay early?
Early repayment is permitted at any stage, without early repayment fees.
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, 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.
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?
You should talk to the lender if you are experiencing financial difficulties and they will have standard processes in place to support customers in those circumstances.
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.
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?
Businesses are entitled to one Bounce Back Loan Scheme facility per separate business unless the business is a group which is a holding company at the top of their structure.
Can I apply again if my application under the Bounce Back Loan Scheme has been turned down?
If a business’ application was declined by an accredited lender then the business is able to make a further application under the Scheme to another accredited lender.
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.
What should I do if I am having difficulty accessing the Bounce Back Loan Scheme via a lender?
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.
The British Business Bank is streamlining the onboarding of new lenders to further extend the reach of the Scheme. Please keep checking the list of accredited lenders for further updates.
Is the loan available under the Bounce Back Loan Scheme a personal loan or business loan?
A loan under the Scheme is a business loan. The terms of the loan are covered by the Scheme.
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?
The Bounce Back Loan Scheme does not require that the applicant must have a business relationship with the lender in order to receive a loan. Customers approaching a lender with whom they do not have any relationship may ask the lender to explain how the loan will be paid to them before they apply.
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.
What are the options if I need further finance down the line?
Under the Bounce Back Loan Scheme, a business which has had their application for a loan accepted, or is part of a wider group (defined by having a holding company at the top of their structure) in which any business has had their application for a loan accepted, is not able to apply for a further loan.
Businesses using the Scheme, who later decide that they need more financing, 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.
What is the difference between CBILS and the Bounce Back Loan Scheme?
|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 will be £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 facility 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 will be 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.
|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 December 31 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 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?
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. Any aid received under the Retail, Hospitality and Leisure Grant and any Business Interruption Payment received under the Coronavirus Business Interruption Loan Scheme will count towards their total State aid allowance under the Temporary Framework. Businesses are required to self-declare that, since 19 March 2019, they 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).
If the business self-declares as being a “business in difficulty” on 31 December 2019, then additional de minimis State aid restrictions apply.
Which businesses meet the “business in difficulty” criteria?
A business is considered in difficulty if it met any one of the following criteria on 31 December 2019:
- 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.
What is the definition of “group” under the Scheme?
For the purposes of eligibility of the Scheme, a group is defined by having a holding company at the top of their structure.
However, as part of the application form, businesses are also required to declare that their business together with all partner enterprises or linked enterprises of the business or under common control, have not breached State aid limits.
For the purposes of State aid, what is a “sole enterprise”?
An applicant’s business is a ‘sole enterprise’ if it holds no more than 25% of the capital or voting rights (whichever is higher) in one or more other businesses; and/or other businesses hold no more than 25% of the capital or voting rights (whichever is higher) in the applicant’s business; and nor is it linked to another business according to the criteria for “linked enterprises”.
In addition, certain investors may individually have a stake of up to 50% in the business and it may still be considered a sole business : public investment corporations, venture capital companies  and business angels  (provided the investment is less than €1.25 million), universities and non-profit-making research centres, institutional investors, (including regional development funds) , or autonomous local authorities (with an annual budget of less than €10 million and fewer than 5,000 inhabitants).
For the purposes of State aid, what is a “linked” enterprise?
Linked enterprises form a group by controlling the majority of voting rights of an enterprise, either directly or indirectly; or being able to exercise dominant influence over an enterprise.
Enterprises are linked when one enterprise holds a majority of the shareholders’ or members’ voting rights in another enterprise; or can appoint or remove a majority of the other enterprise’s administrative, management or supervisory body; or there is a contract between each enterprise enabling one to exercise a dominant influence over the other; or one enterprise can exercise sole control over a majority of shareholders’ or members’ voting rights in another enterprise. A typical example is a wholly owned subsidiary.
An enterprise is indirectly linked to a business if it is directly linked to an enterprise that is linked directly to the business.
For the purposes of State aid, what is a “partner” enterprise?
A “partner enterprise” is an enterprise that has certain financial partnership with another, without one exercising effective direct or indirect control over the other. They are not sole enterprises or linked enterprises.
This is the case where both hold 25% or more of the capital or voting rights in each other; and are not linked to other enterprises. Among other things, their voting rights in each other do not exceed 50%.
Are there any restrictions on financial institutions applying for a loan under the Bounce Back Loan Scheme?
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.
 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.
 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.
 An enterprise will not be categorised as an SME if 25% or more of its capital or voting rights are directly or indirectly owned or controlled, jointly or individually, by one or more public bodies (except those listed in a) to d) which can hold up to 50%).
 A private equity/venture capital investment fund is a vehicle for enabling pooled investment by a number of investors in the equity and equity-related securities (such as quasi-equity) of companies (investee companies). These are generally private companies whose shares are not quoted on any stock exchange. The fund can take the form either of a company or of an unincorporated arrangement such as a limited partnership. In form, a private equity/venture capital company can either be a company or a limited partnership: a few are quoted on stock markets.
 Business angels are private individuals who either solely invest their own cash in SMEs or alternatively invest in syndicates where typically one angel in the syndicate takes a lead role. Angels normally have no previous family connection with the business and make their own investment decision rather than making a decision through an independent manager. The lead angel of the syndicate or the angel investing alone will typically follow the investment after it is made by observing and providing his/her knowledge, experience and support to the investee company by way of mentoring assistance.
 The European Commission does not formally define the concept of ‘institutional investors’. They are, however, usually seen as investors which trade large volumes of securities on behalf of a great number of individual small investors and which have no direct involvement in the management of the firms in which they invest. The term ‘institutional investor’ refers mainly to insurance companies, pension funds, banks and investment companies that collect savings and supply funds to the markets, but the term also applies to other types of institutional wealth (e.g. endowment funds, foundations, etc.). Usually these have substantial assets and are experienced investors.