Coronavirus Bounce Back Loans Announced

This scheme has been introduced by the UK government alongside CBILS (Coronavirus Business Interruption Loan Scheme)

The Chancellor announced on Monday 27th April, that a new loan scheme to help small and medium sized businesses would be introduced. This is a welcomed addition to the existing CBILS loan scheme, as many small businesses have been struggling to access funding.

The eligibility requirements are:

1. The business is based in the UK
2. The business has been negatively affected by coronavirus
3. The business was not in financial distress prior to 31st December 2019

There are a few businesses that are ineligible to apply. They include, Banks, Insurers (Not including brokers) Public sector bodies, and State funded schools/further education establishments.

If you have already been successful for a CBILS loan, you cannot apply for a Bounce Back Loan. However, if you have a CBILS loan of below £50,000, you can arrange to transfer this into the Bounce Back Loan Scheme with your lender, by the 4th November 2020.

The Bounce Back Loan Scheme will launch on the 4th May 2020.

What will the terms of a Bounce Back Loan be?

• The government will guarantee 100% of the loan. This should stimulate banks to provide funding to those in need.
• Funding can be anything from £2,000 to £50,000.
• There will be no fees or interest to pay within the first 12 months of the loan. After this, a low interest rate should be agreed, because the loan is low risk to the bank, as it is 100% guaranteed by the government.
• No repayments of the loan will be due for 12 months.
• Loan terms will be up to 6 years.
• The scheme will be delivered through a network of accredited lenders. This will likely be comparable to the CBILS loans.

The problem with CBILS

CBILS loan eligibility has been changing rapidly, but unfortunately a lot of small businesses have not been able to meet the criteria for the loans. Some of the stumbling blocks have been:

• The smallest amount that could be borrowed on a CBILS loan has been far too high for some small businesses. Banks are starting to reduce those lower thresholds, but a lot of companies have already applied and been declined for funding because of affordability issues.
• In the early days of CBILS, banks were asking directors for personal guarantees. This was putting businesses off, as prior to this, the government suggested that personal guarantees should not be required for loans under £250,000.
• High interest rates after the first 12 months interest free.
• Banks have been more cautious than the government has suggested they should be. Ultimately this is down to the fact that only 80% of the loan will be guaranteed.

It is thought that the Bounce Back Loan Scheme should make it much easier for smaller businesses to obtain funding.

If you would like to discuss how these changes may affect you or how you can access this funding for your business, please contact us at hello@rltp.co.uk, call us on 01332 238833 or contact us here