Bounce Back Loan Scheme for small businesses launches

The Government has opened its new Bounce Back Loans scheme to applications from small businesses needing financial help during the coronavirus pandemic. 

The big banks in the UK reported that they had received around 100,000 applications in a single day for the new loan scheme when it went live on 4th May, with Barclays seeing 200 applications in the first minute and Lloyds 5,000 within three hours.

Announced by Chancellor of the Exchequer, Rishi Sunak on 27th April, the BBLS is being delivered exclusively by lenders, including the five largest banks, accredited by the British Business Bank. The scheme has been designed to specifically target small businesses in all sectors, giving them access to loans from £2,000 up to 25% of their turnover with a maximum loan of £50,000. 

Thousands of businesses – including high street staples such as coffee shops, bakers and hairdressers – will be able to obtain a six-year term loan at a Government-set interest rate of 2.5% a year, with the Government covering the interest in the first year. 

With a simplified application process, the BBLS is expected to give many businesses access to funding within days. 

Chief Secretary to the Treasury, Stephen Barclay, told MPs he also expects to see some companies approved for loans under the Coronavirus Business Interruption Loan Scheme (CBILS) opt for the Bounce Back Loan scheme instead. 

The Treasury wrote to British lenders confirming that the BBLS would be excluded from stringent consumer protection laws to help speed up the process of getting money to small businesses. 

Mr Sunak said: “As a 100% guaranteed loan scheme, the price of BBLS is critical to its success: together, we need to ensure that these loans are affordable and accessible. As such, and incorporating a range of data, I have come to the decision that the rate should be set at 2.5%.” 

The British Business Bank website features a full list of approved lenders. To apply for a bounce back loan, businesses need to complete a short application form on a lender’s website, which self-certifies whether they are eligible. Eligible firms will be subject to standard customer fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks. Some State Aid restrictions may apply to applications. 

Dr Adam Marshall, Director General of the British Chambers of Commerce (BCC) said: “The launch of the Bounce Back Loan Scheme is an important milestone in getting credit flowing to small firms who have so far struggled to access the financial support they need. The standardisation of the interest rate that can be charged after the first 12 months is a welcome step in helping firms manage their ongoing costs.”
 

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Date published 4 May 2020 | Last updated 5 May 2020