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BBL – The new government Bounce Back Loan scheme

What is it?

The Bounce Back Loan (“BBL”) scheme is the new government scheme under which interest free loans of up to £50,000 are being made available to small and micro businesses negatively impacted by COVID-19.

It has been set up in response to the criticism there has been of the larger government schemes, Coronavirus Business Interruption Loan Scheme (“CBILS”) and Coronavirus Large Business Interruption Loan Scheme (“CLBILS”), which have typically required personal guarantees, only been 80% backed by the government and which have lengthy application processes.

BBLs are 100% guaranteed by the government via the British Business Bank and the application process is much quicker – a short application form and then funds should be available within days not weeks. Like CBILS and CLBILS, the loans are actually issued via participating lenders not the British Business Bank itself, and all applications need to be made via an accredited lender.

The government will cover the cost of the first 12 months of interest and any fees.

Who is eligible?

Businesses from all sectors can apply, and although these loans are being targeted at small and micro businesses there is no upper limit on turnover for eligibility. Instead, a potential applicant just needs to be able to self-certify that:

  • it is UK-based in its business activity and has been established prior to 1 March 2020;
  • it has been adversely impacted by the Coronavirus (Covid-19);
  • it is not currently using a government-backed Coronavirus loan scheme (unless using BBL scheme to refinance a whole facility) – i.e. you cannot have both a BBL and a CBILS or a CLBILS; and
  • it is not in bankruptcy, liquidation or undergoing debt restructuring

What are the key features of the BBL scheme?

  • Debt size up to £50k: The limit is the lower of 25% of a business’ turnover and £50,000.
  • 100% government guarantee: The scheme provides the lender with a government-backed, full guarantee (100%) against the outstanding facility balance, both capital and interest. This is different to the 80% backed CBILS and CLBILS loans, and should enable them to be issued much more quickly.
  • Fixed 2.5% rate: All BBLs will have the same 2.5% per annum fixed interest rate.
  • Interest free for 12 months: The first 12 months of interest are covered by the government.
  • 12 month capital repayment holiday: Followed by straight line capital repayments.
  • No fees for applying / drawing the loan
  • 6 year term: All BBLs have a 6 year term, but can be repaid early without penalty.
  • No personal guarantees: Unlike the other coronavirus loan schemes, no personal guarantees are allowed for BBLs, and no recovery action can be taken over a principal private residence or principal private vehicle.

Please note that, like the CBILS and CLBILS schemes, the borrower always remains 100% liable for the debt.

How do I apply?

If you think you will be eligible the easiest route to apply is via your existing contact at your lender, assuming that they are part of the scheme. You can check which lenders are part of the scheme here, and if your current lenders are not part of the scheme then you will need to contact a lender who is.

If you have any queries in relation to any of the above or any other queries around financing your company at this time, please contact Ed Hobbs.

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