On 27 April 2020, the Chancellor announced a new fast-track finance scheme providing loans for small businesses affected by COVID-19 (the Bounce Back Loan scheme).

The Bounce Back Loan scheme launched yesterday and aims to assist smaller companies to swiftly receive the finance they need to help them to survive the crisis.

Bounce Back Loan

The Bounce Back Loan scheme offers loans between £2,000 and £50,000 up to the value of 25% of the business’ turnover. The UK Government will guarantee 100% of the loan, there will not be any fees and the loan will be free of interest or capital repayments for the first 12 months.

Loan Terms

Loan terms will be up to 6 years and the banks have agreed to offer a standardised interest rate (2.5%pa) on the loans once the initial 12-month interest-free period runs out.

It is intended that the Bounce Back Loan scheme will address the issues around the complexity and time-consuming process associated with the existing business support measures (including CBILS). A short online application form (with just 7 questions) is aimed to simplify and speed up the process, allowing small businesses to get the finance they need quickly.

Access to the loans will be though a network of accredited lenders who have agreed that they will adopt lighter touch checks on borrowers.

Bounce Back Loan Availability

The Bounce Back Loan will be available to businesses based in the UK which have been negatively affected by COVID-19 but which were not an ‘undertaking in difficulty’ as of 31 December 2019.

It will not be possible to apply for a loan under the Bounce Back Loan scheme if the business is already claiming funding under CBILS. However, there will be a possibility to transfer a loan of up to £50,000 received under CBILS into the Bounce Back Loan scheme. This can be arranged with the lender until 4 November 2020.

Hopefully, this will get much-needed cash into the businesses described by the Chancellor as “playing a key role in creating jobs and securing economic growth as we recover from the Coronavirus pandemic”.

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Please do get in touch if you require advice.  You can contact our specialist lawyers on 0161 941 4000 or via email.

We also recommend paying close attention to any new government guidance at www.gov.uk and following our COVID-19 blog series.