On Monday 5th May 2020, the Government launched a new type of loan to help small, UK-based businesses, which have been affected by the coronavirus pandemic, and who are not an ‘undertaking in difficulty’ (which seems to mean you need to have a positive balance sheet), and which were formed prior to 1st March 2020.

This is because the take-up of the CBILS loan – which was originally launched in late March 2020 to help businesses affected by the coronavirus – has proven to be of little help to many businesses because, in many cases, the banks responsible for doing the lending were asking businesses to prove their viability (difficult when your doors are closed) and ask for personal guarantees (because the Government was only guaranteeing to cover 80% of the money lent if the loan was never repaid).

The key points of the new Bounce Back Loan are below – but here is a useful FAQ link  https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/faqs-for-small-businesses/#f9

i) It is aimed at small businesses – the amounts lent to businesses will be a minimum of £2,000 and a maximum of £50,000 – but restricted to 25% of the businesses turnover (which I believe can be self-certified);

ii) The loans will be 100% backed by the Government – which means there is no risk to the banks so they don’t have to make borrowers go through the same hoops as with the CBILS loan scheme.  Instead the application process will be via a quick, online form and the loan is expected to be issued within a few days of approval – and there will be no need to personally secure any loans;

iii) It is not possible to borrow a Bounce Back Loan if one has already taken out a CBILS loan.  However, it is possible to transfer a CBILS loan to a Bounce Back Loan (so long as it is no more than  £50,000) which could be useful in removing a Director’s personal guarantee and for saving interest.  If you want to make such a transfer, do talk to the CBILS lender;

iv) The loan will be interest-free for the first 12 months and no repayments will be due in the first 12 months.  After that, the interest rate charged will be 2.5%;

v) The loans will be for up to 6 years.  Borrowers will be able to pay it back early if their circumstances permit it;

vi) The loans will be delivered by a network of accredited lenders.  This includes all the main banks.  The accredited lenders can be found here https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/for-businesses-and-advisors/ but you are recommended to approach your own bank and find the application form via your bank’s website.

More details on the Bounce Back Loan can be found here  https://www.gov.uk/guidance/apply-for-a-coronavirus-bounce-back-loan

I think this could be a lifeline for many businesses to see them through the next 12 months – clearing outstanding supplier invoices to ensure they still get credit once the lockdown is over, being able to pay owner/managers who aren’t well supported by the job retention scheme, and being able to clear higher interest commitments such as HP accounts and credit cards.  There doesn’t seem to be a downside because, even if you don’t use the loan, you can repay it anytime.

Your bank should be supporting you through the process but please contact us if you have any questions.

Peter Bromiley ACA