The UK Government's Bounce Back Loan Scheme (BBLS) is designed to provide fast finance of up to £50,000 to businesses impacted by COVID-19. Chancellor Rishi Sunak announced that payments would be made under the scheme within 24 hours of approval and that "no complex eligibility criteria" would apply. The aim is to get money to those businesses which need it, quickly.

BBLS is the most recently announced offering in the UK Government's evolving support package for businesses. It joins the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Future Fund Scheme to form the quartet of finance packages delivered via the British Business Bank. BBLS is open for an initial 6 month period.

What funding is available?

Term loans are the only form of finance available under the scheme.

How much can I borrow and on what terms?

The key features of the scheme are:

amount:from £2,000 up to 25% of the business's turnover, with a maximum loan of £50,000.

repayment:BBLS loans are term loans of six years. Early repayment is permitted at any stage, without early repayment fees.

guarantee:the scheme lender receives a 100% guarantee from the UK Government against the outstanding facility (capital and interest) but, importantly, the borrower remains 100% liable for the debt.

interest and fees:interest is fixed at 2.5%. Businesses make no repayments in the first 12 months, with the UK Government covering the interest payable during this period. No guarantee fee is charged, and no early repayment fees or other lender-levied fees are permitted after drawdown.

security:personal guarantees cannot be taken for BBLS loans. No recovery action can be taken against either a borrower's principal private residence or their primary personal vehicle.

Only one BBLS loan will be available for a borrower and any group of entities of which it is a part.

Am I eligible?

To be eligible you must:

  • be a UK-based business established by 1 March 2020 and have been adversely impacted by the COVID-19 pandemic. There is no turnover cap.
  • generate more than 50% of your income from trading activity (unless you are a charity or a further education college).
  • not be using CBILS, CLBILS or the Bank of England's Covid Corporate Financing Facility (unless the BBLS loan will be used to refinance borrower's liability under the relevant one of those schemes).
  • not be a "business in difficulty" as at 31 December 2019 (or, if you were, additional de minimis state aid restrictions will apply).
  • not at the time of application be in bankruptcy, debt restructuring proceedings, liquidation or similar process.
  • not be in a restricted sector, including banks, building societies, insurance providers, public sector bodies and state funded primary and secondary schools.

BBLS loans can only be used to provide economic benefit to the business (eg for working capital purposes, or refinancing), and not for personal purposes.

The application process is designed to be simple and the decision-making fast, with borrowers completing an online application form which will contain confirmations on the matters listed above.

Can I apply for a BBLS loan if I already have a CBILS facility?

A business that has a CBILS facility can apply for a BBLS loan if the BBLS loan 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 BBLS where appropriate, however, borrower protections under these schemes differ, and businesses are advised to discuss these with their lender. For example, certain borrowers under the BBLS do not have the benefit of protection and remedies that would otherwise be available under the Consumer Credit Act 1974 where the loan amount is £25,000 or less.

How do I access this funding?

BBLS loans are available through the British Business Bank's accredited lenders. Businesses will be required to fill in a short online application form and self-declare that they are eligible for the scheme.

To apply for a BBLS loan, businesses should approach their own BBLS accredited lender in the first instance, but are also free to approach other accredited lenders if they are unable to access the finance they need or if their existing provider is not accredited to provide BBLS loans.

Contributors

Bruce Stephen

Head of Banking and Financial Services & Partner

Lindsay Lee

Senior Associate