Coronavirus Bounce Back Loan

28th April 2020 Corporate

On Monday evening, the Chancellor Rishi Sunak announced the new Bounce Back Loans scheme to assist small businesses with the ongoing effects of coronavirus. The scheme will allow small businesses to benefit from a new fast-track finance scheme, providing loans with a 100% government-backed guarantee for lenders.

Mr Sunak’s announcement follows the introduction of the £330 billion coronavirus business interruption loan scheme (CBILS), a brief summary of the CBILS scheme can be found here. When introducing the new scheme Mr Sunak told MPs that the "bounce back" loans were a consequence of many businesses struggling to access credit during the lockdown. As such, this announcement is likely to be good news for small to medium-sized businesses taking into account the widespread reports of banks being slow and reluctant to lend to these businesses under CBILS as this scheme has only an 80% government-backed guarantee for lenders.

The Bounce Back Loans scheme is aimed at small and medium-sized businesses and will allow those businesses to borrow between £2,000 and £50,000. In addition to the government’s guarantee of the loan, there will not be any fees or interest to pay for the first 12 months and loan terms will be up to 6 years. The government’s guidance has also confirmed that it will work with lenders to agree a low rate of interest for the remaining period of the loan.

The scheme will launch for applications on Monday 4 May and businesses will be able to access these loans through a network of accredited lenders. Mr Sunak also stated that once the loans are available payments would be made within 24 hours of approval, with "no complex eligibility criteria".

Mr Sunak also confirmed that the sums involved with the new scheme meant that the government could meet the risks associated and in introducing the scheme he rejected calls, made by business groups, for the government to guarantee 100% of other emergency schemes.

The eligibility details for the Bounce Back Loan scheme are set out below:

You can apply for a loan if your business:

  • is based in the UK;
  • has been negatively affected by coronavirus; and
  • was not an ‘undertaking in difficulty’ on 31 December 2019

Who cannot apply

The following businesses are not eligible to apply:

  • banks, insurers and reinsurers (but not insurance brokers)
  • public-sector bodies
  • further-education establishments, if they are grant-funded; and
  • state-funded primary and secondary schools

If you’re already claiming funding

You cannot apply if you’re already claiming under the Coronavirus Business Interruption Loan Scheme (CBILS). The government has confirmed that if you have 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 until 4 November 2020.

If you want to discuss any of the content in this blog, please contact your usual JMW contact ​​​​on 0345 872 6666 or complete the contact form found on this page.

This article is for general guidance only and should not be used for any other purpose. It does not constitute and should not be relied upon as legal advice and reflects the position as at the time of writing (28th April 2020). We recommend that you review the daily updates and guidance issued by the government.

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Dominic Coyle is a Trainee Solicitor located in Manchesterin our Trainee Solicitors department

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Mark Heppell is a Partner located in Manchester in our Corporate department

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