The Government has introduced a new Bounce Back Loan Scheme which you may be able to claim. Please find below the details of the loan available and the criteria required for you to be able to do so.
BOUNCE BACK LOAN SCHEME
The Bounce Back Loan Scheme is a new scheme introduced to help smaller businesses impacted by coronavirus (COVID-19). It aims to assist those businesses to borrow between £2,000 up to 25% of a business’ turnover (the maximum amount available is £50,000).
The Government will cover any interest payable in the first 12 months through a Business Interruption Payment to the lender, and lenders will benefit from a 100% government-backed guarantee. The government has set the interest rate for this loan at 2.5% per annum and the repayment term is fixed at six years. No repayments will be due during the first 12 months. Businesses remain 100% liable to repay the full loan amount, as well as interest, after the first year.
Are you eligible?
The Scheme is open to most businesses, regardless of turnover, who meet the eligibility criteria and who were established on or before 1 March 2020. Borrowers are required to declare, amongst other things, that:
- The business is engaged in trading or commercial activity in the UK at the date of the application, was carrying on business on 1 March 2020 and has been adversely affected by coronavirus (COVID-19).
- The business (and any wider group of which it is part) has not already received a Bounce Back Loan Scheme facility.
- The business (and any wider group of which it is part) has not yet obtained a loan through either the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, or the Covid Corporate Financing Facility, unless that loan will be refinanced in full by the Bounce Back Loan Scheme facility.
- That the business is a UK limited company or partnership, or tax resident in the UK.
- The business is not a bank, building society, insurance company, public sector organisation, state-funded primary or secondary school, or an individual other than a sole trader or a partner acting on behalf of a partnership.
- Whether or not the business was, on 31 December 2019, a “business in difficulty” and does not breach State aid restrictions under the Temporary Framework; and if it was a “business in difficulty” then it must confirm it does not breach de minimis State aid restrictions and will not be used to support export-related activities.
- At the time of submitting their loan application, the business is neither in bankruptcy, debt restructuring proceedings, liquidation or similar.
- More than 50% of the income of the business (together with that of any member of any group of which it is a part) is derived from its trading activity. This confirmation is not required if the borrower is a charity or a further education college.
- They will use the loan only to provide economic benefit to the business, and not for personal purposes. They have understood the costs associated with repayment of the loan and that they are able and intend to complete timely repayments in future. The application form also requires confirmations to be given in relation to losses that may be incurred, impact on credit rating, financial risk to personal assets (other than primary residence and primary personal vehicle), reduced consumer protection provisions, data protection consents and that lenders will not assess affordability. Borrowers are advised that they should seek independent legal advice if they are in any doubt about the consequences of the loan agreement not being regulated by the Financial Services and Markets Act 2000 or the Consumer Credit Act 1974 or any other aspect of taking out a loan. For some businesses, who self-declare as being a “business in difficulty” on 31 December 2019, there may be restrictions on the amount of finance they are allowed to borrow and what they can do with the loan
How to apply?
Businesses will be required to fill in a short online application form and self-declare that they are eligible for the Scheme. In the first instance, businesses, where possible, should approach their own Bounce Back Loan Scheme accredited provider. They may also consider approaching other Scheme accredited providers if they are unable to access the finance they need or if their existing provider is not accredited to provide loans under the Scheme.
If you need any further guidance or help, please do not hesitate to contact us.