Bounce Bank Loans

The bounce back loans scheme will enable businesses to borrow between £2,000 and £50,000 and access the cash within days, and in some cases within 24 hours.  The amount you can borrow is limited to 25% of the business turnover.

Loans will be interest free for the first 12 months, and businesses can apply online through a short and simple two-page standardised application form. There are no forward-looking business viability tests or eligibility criteria for the finance.

The government will provide lenders with a 100% guarantee for the loan and pay any fees and interest for the first 12 months.

Rishi Sunak, Chancellor of the Exchequer, said: ‘Our smallest businesses are the backbone of our economy and play a vital role in their communities. This new rapid loan scheme will help ensure they get the finance they need quickly to help survive this crisis.

‘This is in addition to business grants, tax deferrals, and the job retention scheme, which are already helping to support hundreds of thousands of small businesses.’

The scheme will launch for applications on Monday 4 May. Firms will be able to access these loans through a network of accredited lenders.

Frequently Asked Questions.

Q. Are there any strict rules on what the money must be used for? Can it be used to support income of sole traders or limited company directors? [This question was from MSE]. A. “Our Bounce Back Loan Scheme will ensure that small firms who need vital cash injections to keep operating can get finance with a 100% Government-backed guarantee in a matter of days, with thousands of loans approved already today. The loan can be spent on investment or working capital for the business- including bills, running costs and wages.”
Q. What if I stopped trading after coronavirus, as no longer feasible and business running at a loss – will the bounce back loan have to be repaid if the business is not operating into 2021? What is the liability? A. “All businesses that take out a bounce back loan are responsible for repaying any facility they make take out. No business will be required to make a repayment during the first 12 months of the loan, giving them time to get back on their feet.”
 

Q. Will loan repayment amounts be confirmed at the time of application? A. “Yes.”

Q. What are the qualifying criteria for a bounce back loan? “Businesses must be:

  • Adversely impacted by coronavirus
  • Established on or before 1 March 2020
  • Still trading at date of application (temporary cessation due to coronavirus does not apply)”

Q. Do you need a business account to qualify for a bounce back loan? What if I’m a sole trader who operates through a personal account. A. “No, you do not need a business current account. If you have a personal current account with the lender you are applying to, you will need to provide your 2018/19 income tax self-assessment return. Your lender may also ask you for additional information to verify you as a business customer.”

Q. Is there a criterion regarding minimum revenue and profit threshold? A. “You may only apply for a loan of up to 25% of your turnover, but there is no constraint of the size of business that can apply for a loan.”

Q. Can the loan be paid as a dividend if the business has retained profits but is cash poor? A. “Yes.”

Q. I am a small limited company who has taken out a bank loan at a high APR rate which I have to stand as a guarantor. Can I apply for a bounce back loan for the same amount to pay off the bank? A. “Yes.”

Q. How long will it take for the loans to be paid from point of application? A. “If you apply to a lender with whom you have an existing relationship as a business customer, lenders will endeavour to ensure you receive the funds the following day. If you are not a business customer or apply to a different provider, this process may take more time.”

Q. How long will the bounce back loans be open to applications for – for instance, what if I need help in 2021? A. “The scheme is intended to run for six months (with an option for extension should circumstances warrant it).”

Q. I am an employed part-time hairdresser on furlough, but also have a mobile hairdressing business, which I operate as a sole trader. Am I eligible for the loan? A. “Yes.”

Q. Is there a date restriction on limited companies? I switched from sole trader to limited company on 9 March. I’m basically stuck in the middle of everything. A. “If you can verify that you were a sole trader before 1 March and show that your business is essentially the same as the one being carried out then, you will be able to apply.”  

Q. Would bounce back loans be accessible for those who only went self-employed in September? A. “Yes, provided that they can demonstrate they were established on 1 March 2020, have been adversely affected by Covid-19, are still in business at the date of the application and more than 50% of their business’s income is derived from trading activity.”

Q. Are PSCs (people of significant control) excluded from bounce back loans? A. “No.”

Q. Are limited company directors eligible for a bounce back loan? A. “Yes, if they are a sole director and applying on behalf of their business. All applications must be made by the business and the loan must be used wholly for business purposes, not personal purposes.”