The Bounce Back Loan Scheme (BBLS) is part of the government’s wider finance relief package to support those struggling as a result of the pandemic, to help them stay afloat and eventually get back on their feet.

Since the launch of the BBLS in response to the ongoing COVID crisis, there have already been more than 600,000 borrowers benefitting from nearly £19billion worth of financial support.

Let’s break this down into bitesize chunks.

What is a bounce back loan?

A bounce back loan is a form of financial support actioned by the government in light of the COVID-19 pandemic. It is available for businesses experiencing cash flow or revenue problems as a direct result of COVID-19.

The list of lenders is still expanding, all of which are British Business Bank (BBB) accredited partners. There are plenty of the big names that you’d expect to see. Barclays, Bank of Scotland, NatWest, Santander and most recently, Metro Bank, are all offering loans under the terms of the scheme.

What sort of lending terms are available through the Bounce Back Loan Scheme?

Bounce back loans were originally issued on a 6-year term that could be paid back earlier, and without the borrower being subject to early repayment fees. The Chancellor’s recent Winter Economy Plan extends the loan period from 6 years to 10. This gives borrowers more time to repay the loan if the need it.

The application period has also been extended. Potential borrowers now have until March 2021 to apply for a loan under the bounce back scheme.

Lenders can provide anything from £2,000 to 25% of the business’ turnover, but are capped at a maximum loan of £50,000.

Interest rates have been made deliberately affordable at 2.5% per annum so that the scheme is fair and accessible to a diverse range of businesses.

Who is eligible for the Bounce Back Loan Scheme?

The list of those applicable to the BBLS is varied but specific. In order to be accepted for a loan, you must:

• be impacted directly by the consequences of COVID-19
• be engaged in trading or commercial activity in the UK
• have been established by 1st March 2020
• derive 50% or more of your income from trading activity (charities and further education colleges are exempt from this regulation)

…and you must NOT:

• have been a business in difficulty before 31st December 2019
• be in bankruptcy or liquidation during the time of application
• be in a restricted sector (which includes, but is not exclusive to, insurance companies, public sector organisations and state funded schools)

How do I apply for a bounce back loan?

The BBLS application process requires just a few simple steps:

• Approach an approved lender via their website (start with your own provider)
• Fill in the short application form to establish your eligibility
• Go through the quick customer fraud, Anti Money Laundering (AML) and Know Your Customer (KYC) checks
• Wait for your lender to make a decision (usually within a few days)
• If they say yes, happy days! If they say no, you are able to apply with any other lenders.

The pros and cons of the BBLS

Before you rush off to submit your application, stick around to digest some of the advantages and disadvantages that are coming to light around the BBLS. Spoiler alert: fortunately, the pros far outweigh the cons.

The good

• Borrowers don’t have to make any repayments for the first 12 months of the 6-year term.
• The government will make a Business Interruption Payment (BIP) to cover the first year’s worth of interest payments.
• Neither borrower nor lender is subject to access fees.
• Lenders aren’t allowed to take personal guarantees or recovery action over the borrower’s personal assets.
• The application process has been made deliberately quick and streamline to enable businesses much faster access to funding during this difficult time, with most applications being processed within a matter of days.
• Interest rates have been kept purposefully low (2.5% per annum) to make the scheme more accessible.

The bad

• The BBLS is in high demand which means lenders are dealing with a large quantity of applications. Despite the process being designed to be speedy and simple, phone lines are busy and responses may be a little delayed.

The ugly

• The nature of the beast means that the scheme – despite being as watertight as possible – is still vulnerable to fraud. Keep your wits about you and only deal with BBB-approved lenders.

If you need more information on the support that’s available to businesses dealing with the impact of COVID-19 check out our support hub, or call us on 020 3355 4047 to find out how our online accountants can help.