Bounce Back Loans scheme for small businesses

The Chancellor has announced a new loans measure, known as the Bounce Back Loans Scheme (BBLS), which will allow small businesses to borrow up to 25 per cent of their turnover, up to a maximum of £50,000.

The BBLS will be 100% backed by a Government guarantee, unlike the Coronavirus Business Interruption Loan scheme (CBILS) and will offer an interest-free period for 12 months.

Businesses will be able to apply online via a short and simple two-page self-certification form and because the loan is entirely Government-backed it is hoped that lenders will have the confidence to offer finance without the lengthy and complex red tape associated with CBILS and other loan schemes.

Importantly, firms applying for the new loans will only have to prove that they were viable in the past before the crisis, not that they will remain viable after the crisis.   This future viability criteria has been a major issue with CBILS.

There remains some concern that banks will still wish to assess the latest financials through a ‘cash available to service debt’ calculation. Where there isn’t sufficient cash to service the debt then there are fears that the loan may still not be granted despite the Government guarantee. Further clarification is expected soon.

The scheme has been designed specifically for small firms, including sole traders, that require ‘vital cash injections’ to help them operate during these challenging times.    It will launch for applications from 9am on Monday 4 May and the loans will be provided through a network of accredited lenders.

The Government said that loans will be “advanced as quickly as possible” and that they will “agree a low standardised level of interest for the remaining period of the loan.”

We will keep you up to date on the application process once more is known.