Back in April 2020, the government announced the launch of a new fast-track loan scheme to support Britain’s small businesses during the coronavirus crisis.
The Bounce Back Loan scheme is one of a raft of measures to help small and local industry, described by Business Secretary, Alok Sharma as being ‘vital for thriving communities, the creation of jobs and securing economic growth’.
Here’s our no-nonsense guide to the new loan scheme.
A government-backed loan for sole traders and small to medium-sized businesses available from major banks including Barclays, TSB and NatWest.
Like personal loans, Bounce Back Loans are unsecured which means assets such as your property and vehicle are not put at risk.
Instead, the government provides security by guaranteeing 100% of the amount you borrow.
However, it is important to realise that you will be liable for the entire debt. If your business cannot repay the loan, the government guarantee will only be activated once the lender has chased you for what is owed.
Find out more at the government’s website.
Bounce Back Loans opened for applications on 4 May 2020, having been announced by the Chancellor, Rishi Sunak on 27 April 2020.
The scheme is currently open to applications until 31 March 2021.
Sole traders and small to medium-sized businesses that are based in the UK, solvent, were set up before 1 March 2020 – and have been adversely affected by coronavirus – are eligible.
Any type of business can apply, including hairdressers, florists, accountants, online retailers and coffee shops.
However, banks, insurers, public sector bodies and state-funded schools will not be eligible.
There are no strict definitions but a maximum annual turnover of £200,000 is a good benchmark on the basis you can apply to borrow 25% of your annual turnover up to a maximum of £50,000.
Other government help is available. Try the Coronavirus Business Interruption Loan Scheme or Coronavirus Large Business Interruption Loan Scheme. Our guide has more details.
The repayment term for a Bounce Back Loan is six years – the first year of which no loan repayments, interest or fees are payable.
For the remaining five years, you will be charged a 2.5% fixed rate of annual interest – considerably cheaper than a personal loan.
You can also repay a Bounce Back loan early without penalty and in many cases – such as the TSB Bounce Back Loan and Santander Bounce Back Loan – make smaller monthly overpayments.
You will not be eligible for a Bounce Back Loan if you’re already claiming under either of the Coronavirus Business Interruption Loan Schemes, or COVID-19 Corporate Financing Facility.
The exception is if you are using the cash from the Bounce Back Loan to pay off this debt.
There are a wide range of lenders are offering Bounce Back Loans, including TSB, NatWest, Starling and Yorkshire Bank.
All participating banks are accepting loan applications from existing business account customers and those using a personal bank account for their business.
If you are using a personal current account for your business, some lenders such as Bank of Scotland and Barclays require you to open a business account first.
A handful of banks such as NatWest and Ulster Banks, are accepting applications from brand new customers who open a business account first.
So long as it’s for the economic benefit to the business and not for your own personal use, there are no strict guidelines.
For example, you could use the cash to pay wages or bills, buy new stock or invest in marketing.
You may be able to use the loan to pay off existing business debt such as overdrafts. Check with the individual lender.
If your application is rejected, you are free to apply to another Bounce Back Loan provider. However, the lender may decide to offer you another type of finance.
We do not currently support Bounce Back Loan applications – but we are here to help.