Further to the Chancellors announcement, on the 27th April 2020 the Government published the details of what is now known as the “Bounce Back Loans Scheme”, to help small and medium sized businesses.
This scheme is not available yet and will launch on 4 May 2020 and can be accessed by following this link: https://www.gov.uk/guidance/apply-for-a-coronavirus-bounce-back-loan
The Bounce Back Loan scheme will help small and medium-sized businesses to borrow between £2,000 and £50,000 as the Government will guarantee 100% of the loan, which it hopes will encourage banks to lend to those in need as it removes the risk of non-payment from the banks.
Like the previously announced CBILs scheme, there won’t be any arrangement fees or interest to pay for the first 12 months.
Loan terms will be up to 6 years with no repayments being due during the first 12 months.
The Government will work with lenders to agree a low rate of interest for the remaining period of the loan as this has been a concern for many.
The scheme will be delivered through a network of accredited lenders of which the main ‘High Street’ banks are all members plus a raft of smaller regional providers
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
It is this third point that is causing the most confusion for many applicants. The phrase ‘undertaking in difficulty’ is taken from European State Aid rules and as such has a strict legal connotation which is then being referred to by lenders as the Business Viability test. While we have seen a number of interpretations of this (and we would in no way suggest that this is a complete picture) there are some common themes which emerge, which include;
- The business cannot have negative reserves
- The business cannot be sustaining losses with no likelihood of reversing this.
- The business must not be looking to service existing finance with new finance.
- The business owners must look to modify their own lifestyles and take advantage of mortgage payment holidays, etc so as not to overstress the business cash-flow.
Who cannot apply
The following businesses are not eligible to apply:
- Banks, insurers and reinsurers (but not insurance brokers)
- Public-sector bodies
- State-funded primary and secondary schools
If you’re already claiming funding
You cannot apply if you’re already claiming under the Coronavirus Business Interruption Loan Scheme (CBILS).
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 until 4 November 2020.
We look forward to be able to bring you more details when the scheme is fully opened and we have some real-life example and experience in submitting these claims. If you think that this might be the right step for your business then please contact in the first instance firstname.lastname@example.org who will advise you of the preparation you will need to do in advance of making an application to maximise your chances of accessing the support and reducing the time taken to process the application.
For further advice on how to manage your business and access funding and support during the Coronavirus, check out our other blog posts: