BBL: alternative finance scheme for small businesses
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BBL: alternative finance scheme for small businesses

The impact of Coronavirus has been significant for many small business owners, leaving them struggling with finance and cash flow issues. The Government has recently introduced a number of measures designed to combat to the economic impact of COVID-19 for small businesses, including loan schemes such as the Coronavirus Business Interruption Loan Scheme (CBILS). However, the criteria for this loan meant that many smaller businesses were missing out or simply not getting access to finance quickly enough.

Following mounting pressure from the small business community, on April 27, Rishi Sunak announced a new support scheme that would cater specifically to the needs of these businesses. The ‘Bounce Back Loans’ scheme that launches Monday, May 4, will run alongside the existing Coronavirus Business Loans Interruption Scheme (CBILS).

What is a Bounce Back Loan?

This new scheme aims to provide smoother access to cash for small companies facing difficulty accessing existing government-backed lending. It offers small businesses 100% government guaranteed loans of between £2,000 and £50,000 that will be interest free for the first 12 months. According to the Treasury, after that period, interest rates will be kept ‘very low’ with loans typically paid back over five years.

According to the Chancellor these loans will not require forward looking criteria or complex eligibility requirements. Businesses can apply for a loan using a short and simple online form and funds could be available just 24 hours from the time of applying.

Is my business eligible for this scheme?

According to the GOV.UK website, the scheme is set to be delivered through a network of accredited lenders, although they are yet to announce who these lenders will be. They have advised that 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

If your business meets any of the following criteria, you will not be eligible to apply:

Although businesses will not be able to claim for both the CBILS and Bounce Back Loan, the government has advised that 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 but this must be done before November 4, 2020.

Updates to the Coronavirus Business Interruption Loan

The Bounce Back Loan will run alongside the existing Coronavirus Business Loans Interruption Scheme (CBILS). This scheme went live on March 23, and according to figures released by UK Finance on April 23, there has already been £2.8 billion of lending provided to SMEs so far through the scheme. If you’d like to find out more about it, you can read our full Coronavirus Business Interruption Loan Q&A

Whilst there has been some criticism of the scheme, UK Finance reported that within the first month lenders had received over 36,000 completed applications with more than 16,600 of these being approved. The Government hopes that with more lenders offering loans, they will be able to speed up the funding process and in turn help even more businesses access the funds they need.

If you are seeking all the latest government information on Covid-19 and the measures the Government, and Devolved Governments, are taking, please visit the UK Government website, the Scottish Government website, the Welsh Government website or the Northern Irish Government website.