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Microbusiness £50,000 Bounce Back Loans – how they work

Government announces 12-month interest-free microbusiness Bounce Back Loans scheme with £50,000 limit and 100% guarantee
Rishi Sunak has written to lenders attached to the Bounce Back Loans Scheme (BBLS) instructing them to set interest rates at 2.5 per cent.

This is in order to make take-up of Bounce Back Loans as strong as possible compared to the sluggish take up of emergency coronavirus business loans.

And this 2.5 per cent ceiling only kicks in after the 12-month, interest-free period has kicked in.

This is less than half of the minimum interest rate being charged for Coronavirus Business Interruption Loans (CBILS).

According to the Times, lenders are pushing for Bank of England to take the loans onto its balance sheet, absolving lenders from having to do anything but get the loans out of the door.

One banker told the Evening Standard that if the government wants to hand out money without proper checks, it should have been done as a grant, not a loan.

He described the loans as being “essentially self-certifying”, with no formal checks or proof required about the borrower’s likely financial future.

How the Bounce Back Loans will work

The government has launched it's microbusiness Bounce Back Loans scheme with a 50,000 limit and a 100 per cent guarantee.

  • Businesses will be able to borrow between £2,000 and £50,000 and access the cash within days
  • There is no cap on turnover for a microbusiness applying for a Bounce Back Loan
  • However they can only apply for a Bounce Back Loan or up to £50,000 or 25 per cent of current turnover (whichever is higher)
  • Loans will be interest free for the first 12 months, and businesses can apply online through a short and simple form
  • 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
  • Loan terms are up to six years
  • All firms trading as of March 1 will be able to get cash
  • Banks will no longer require forward financials or business plans
  • You can’t apply if you’ve already had a coronavirus business interruption loan but you can port your existing loan of up to £50,000 across
  • Treasury says doors open next Monday, May 4 and will deliver cash to successful applicants within 24 hours.

As with the Coronavirus Business Interruption Loan Scheme, the British Business Bank will administer the Bounce Bank Loans.

However, small businesses can only apply for a Bounce Back Loan if your business was not an “undertaking in difficulty” as of December 31 2019.

Equally, you’re excluded from applying if you’re already claiming under the CBILS.

That said, if you’ve already received a loan of up to £50,000 under CBILS and would like to transfer it into the Bounce Back Loan scheme, you can arrange this with your lender between now and November 4 2020.

Mike Cherry, national chairman of the Federation of Small Businesses, said: “To date, the existing interruption loan scheme has not been working for the small firms that make-up 99 pr cent of our business community" as reported by smallbusiness.co. uk

“The decision by the chancellor to listen to our recommendation for a 100 per cent guarantee on smaller loans, alongside the creation of a new fast-track system for those applying for them, will give hope to thousands.”