4th May, 2020 by Ian Ilersic
In March 2020 in response to the coronavirus pandemic, Chancellor of the Exchequer, Rishi Sunak, announced the Coronavirus Business Interruption Loan Scheme (CBILS) through the British Business Bank (BBB). The aim of CBILS is to support businesses with a turnover of up to £45 million in accessing bank funding by providing lenders with a guarantee of 80% of loan value to support lending to SMEs. This was followed in April by the Coronavirus Large Business Interruption Scheme (CLBILS) to support businesses with a turnover of over £45 million.
If your business has a turnover of up to £45 million, click here to find out more about CBILS. If your business has a turnover of more than £45 million, click here to find out more about CLBILS.
A criticism of both CBILS and CLBILS has been that funds have been too slow to reach companies that have immediate cash flow pressures.
In response to these concerns, a further scheme, the Bounce Back Loan Scheme (BBLS), was launched on 4 May 2020 with the aim of helping small and medium sized businesses borrow term loans of between £2,000 and £50,000 through a simple online application process (the online form contains only 7 questions).
This article covers the key features of BBLS, eligibility for the scheme and how to apply.
As with CBILS and CLBILS, BBLS is available through a range of BBB accredited lenders listed on the BBB website.
An accredited lender can provide a six year term loan from £2,000 up to 25% of the turnover of a business. The maximum loan amount under the scheme is £50,000.
Loans under BBLS are business loans and must only be used to provide an economic benefit to the business (e.g. working capital) and not for personal purposes.
The key features of BBLS are:
For lending outside BBLS, the Consumer Credit Act ordinarily requires lenders to provide sole traders, small partnerships and unincorporated associations seeking finance up to £25,000 with information before a loan is granted, and to provide further information throughout the course of the agreement. However, in order for the application process to be as fast as possible, the usual rules will not apply to BBLS. Not all protections will be removed. Under BBLS lenders will be required to provide relevant information to businesses, and should businesses encounter financial difficulty, lenders will have to comply with relevant regulations regarding collection of loan debt.
Businesses from most sectors, regardless of turnover, are eligible. The following trades and organisations are not eligible (restricted sectors): Credit Institutions (within the scope of the Bank Recovery and Resolution Directive), Insurance companies; Public sector organisations including state funded primary and secondary schools. In order to apply, a business must be a UK limited company or partnership, or tax resident in the UK.
To be eligible for a facility under BBLS, a business must be able to self-declare that it:
A business is considered in difficulty if it met any of the following criteria as at 31 December 2019:
BBLS is available through BBB’s accredited lenders. As noted above, these are listed on the BBB website. The scheme is part of the UK government’s temporary response to the economic shock caused by the coronavirus pandemic. It will initially be open until 4 November 2020 with the government retaining the right to extend this.
In the first instance, businesses should approach their own provider – ideally via the lender’s website. Businesses may approach other lenders if they are unable to access the funding they require.
Applications will be by way of a short online application form which includes a self-certification from the applicant business that it is eligible for a loan under BBLS. If a business is eligible, there may be some fraud prevention, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks carried out by the lender.
The lender has the authority to decide whether or not to offer finance, but the intention is very much that this is a quick and easy process for eligible businesses, with cash being advanced “within days” according to HM Treasury.
Any business which has already taken out a CBILS loan of £50,000 or less can apply to its lender to have it switched over to BBLS if it wishes to do so.
Initial reaction from business groups has been positive with the National Chair of the Federation of Small Businesses, Mike Berry, saying “We know many small firms have struggled to secure small loans speedily. We are pleased that the Chancellor has listened, and swiftly developed this new scheme for small businesses to access finance quickly, interest-free for the first year and at an affordable fixed interest rate for the remainder.”
BBB asks that any questions are directed by businesses to their current providers, not BBB directly. The BBB website has a lot of supporting information including a helpful BBLS FAQs for businesses.
If you have any queries regarding business funding (under BBLS, CBILS, CLBILS or otherwise) please do not hesitate to contact one of our team.
The information on this site about legal matters is provided as a general guide only. Although we try to ensure that all of the information on this site is accurate and up to date, this cannot be guaranteed. The information on this site should not be relied upon or construed as constituting legal advice and Howes Percival LLP disclaims liability in relation to its use. You should seek appropriate legal advice before taking or refraining from taking any action.
To contact us, please fill out this form and we will get back in touch as soon as possible.
Your personal data will be processed in accordance with our privacy policy which can be found here.
