Here’s Everything You Need To Know About Bounce Back Loans!

What Are Bounce Back Loans?

Bounce Back Loans are intended to provide financial support to businesses across the UK witnessing tight cash flow and falling revenues as a result of COVID-19 outbreak.

The government has launched its Bounce Back Loans Scheme offering loans of between £2000 and £50000 at a fixed interest rate of 2.5 per cent providing quick and easy way to access loans.

The cash for it is expected to land within days and the length of the loan is for a period of six years.

Below we mention some more features of this scheme:

These loans will be backed for lenders by the government completely, and businesses can apply online through a simple and short form
In order to avail these loans, small businesses can apply to accredited lenders after filling out a simple online form with only seven questions
Any business that has already taken out a Coronavirus Business Interruption Loan of £50000 or less can apply to have this switched over to Bounce Back Loans
The government will cover the cost of any fees and interest for the borrower for the first 12 months
No repayments will be due during the period to enable firms to get back on their feet
Loans will be from £2,000 up to 25 per cent of a business’ turnover or £50,000, whichever is lower
Borrowers will fill in a two-page application form in which they will certify that they have a viable business, lifting obligations on lenders to carry out their own checks
No personal guarantees are allowed, and no recovery action can be taken over a principal private residence or principal private vehicle
Banks will no longer require forward financials or business plans

Please note that there is no fee to access this scheme for either businesses or lenders.

You can read up more here

Are You Eligible For Bounce Back Loans?

For a business to be eligible for this scheme, it

Must be UK- based established by March 1 2020
Must have been adversely affected by the coronavirus
Must not be availing a government backed coronavirus loan scheme
Must not be in liquidation, bankruptcy or undergoing debt restructuring

However, eligible companies will be subject to Know Your Customer (KYC), standard customer fraud and anti-money laundering (AML) checks prior to any loan being finalized. Some State Aid Restrictions may also be applied to applications.

Also, the borrower shall always remain 100% liable for the debt.

However, the following sectors are not eligible for Bounce Back Loans:

Insurance companies
Credit Institutions
State-funded primary and secondary schools
Public Sector Organizations

Where Can You Find Bounce Back Loans?

Accredited lenders and partners can be found across the UK on the British Business Bank Website here

They include:

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How To Apply For Bounce Back Loans?

Businesses will be required to fill in a short online application form on their lender’s website which self-certifies whether they are eligible for this facility.

Follow these steps to apply for this loan:

Find a lender through British Business Bank Website here
Approach a lender who will ask you to fill in a short online application form on their website which self-certifies whether you are eligible for this facility
Wait for the lender’s decision who will decide whether to offer you finance or not

Please note that under this scheme, lender cannot take any form of personal guarantee or take recovery action over a borrower’s personal assets.

Also bear in mind that you can still approach other lenders in the scheme if one lender turns you down.

The government has designed Bounce Back Loans Scheme to be fast for lenders to process and easy for businesses to access.

Find more details here

How Are Bounce Back Loans Different To The Coronavirus Business Interruption Loans Scheme?

Bounce Back Loans differ from Business Interruption Loans Scheme in terms of personal guarantees and affordability rules.

Businesses that apply for Bounce Back Loans Scheme can do so without the need to use personal guarantees and will not need to meet any affordability requirements.

This also means that the businesses will not have the usual protections available to them for loans under £25,000

Nevertheless, they will be responsible for the decision to borrow the money and not the lender.

Coronavirus Business Interruption Loans Scheme, on the other hand, can include personal guarantees for loans above £250,000 and requires lenders to show the loan is affordable.

This means businesses will be able to retain their statutory rights as they would for an equivalent form of borrowing.

Also, the process is more stringent and requires evidence that the business is viable outside of this pandemic, and can afford the monthly payments along with any debt already piled up.

How Long Is The Bounce Back Loan Scheme Available For?

Presently, the scheme is available until 4 November 2020. However, the Government has the option to extend this.

Note:

Please bear in mind that most phone lines are likely to be busy as there is high demand for finance through Bounce Back Loans. As a result, the branches may not be able to handle enquiries in person.