Help for SMEs: Bounce Back loans

Originally featured on the Starling Bank blog. For more information on the support Starling are offering their customers, click here.

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Some of the smallest businesses in the economy have been given a potential lifeline: the chance to apply for up to £50,000 in 100% government-backed loans, with no interest over 12 months.

Five weeks after lockdown, the UK government has announced yet more financial support for small and medium-sized enterprises (SMEs) – this time in the form of emergency “Bounce Back” loans.

The Government has said that they will provide full details of the scheme on Monday 4 May. As an accredited CBILS lender, Starling is going to be offering loans under the Bounce Back scheme. We’ll be publishing more details and a way to register for this scheme soon. Starling Bounce Back loans will be available as soon as possible after 4 May.

Under the Bounce Back loan scheme, the Government announced that the smallest tier of companies in the UK economy will be able to borrow between £2,000 and £50,000 – capped at 25% of a business’s turnover, which would be a maximum of £200,000. The loan would be 100% guaranteed for lenders, by the Government

Chancellor of the Exchequer Rishi Sunak said the new funding, announced on 27 April, is designed to provide emergency aid for “the smallest businesses” which make up the backbone of the economy and which might not have been eligible for other financial support.

The Bounce Back loans are separate to the previously announced Coronavirus Business Interruption Loan Scheme (CBILS), which allows SMEs to apply for larger amounts, up to £5 million, and which is backed by an 80% government guarantee. The Bounce Back loans should be quicker to access, with a promise from the Chancellor that the money should be delivered to companies 24 hours after application approval.

When more details about the Bounce Back loan scheme are released, we will publish an update on our site. It’s also important to keep checking the government’s website.

Updated 3 May 2020: You can now register your interest in a Bounce Bank loan

Am I eligible?

Sole traders, entrepreneurs and small businesses can apply. If your business meets all the following criteria you may be eligible for a loan:

• Based in the UK.
• Struggling due to coronavirus.
• Trading as of 1 March.
• Was not classed as an “undertaking in difficulty” as of 31 December 2019. Certain companies cannot apply, like banks, insurers and reinsurers (excluding insurance brokers), public sector bodies and state-funded primary and secondary schools.

What will be the application process?

• Companies can apply through a short online form.
• Sunak has promised “no complex eligibility criteria”. The online form will contain minimal checks, with no need for a credit check or an investigation to ensure the company is financially viable. There is also no requirement for a business plan.
• Some fraud checks may still apply.
• If the application is approved, the funds should be in the company’s account within 24 hours.
• The loan will be delivered from the British Business Bank via a network of at least 50 accredited lenders.
• More information will be published on the government website.

What are the terms of the loan?

• The loans are interest-free for the first 12 months, and no repayments are due within this period.
• They are 100% backed by the government, whereas the CBILS loans are 80% government-backed.
• There are no arrangement fees or early repayment charges.
• The maximum term of the loan is six years.
• The government is negotiating with lenders to ensure a low and standardised rate of interest for the duration of the loan.
• It has not yet been announced whether the government will allow non-traditional, fintech lenders to be part of the lender network.

What if I’ve already received a CBILS loan?

You cannot apply to both the CBILS and the Bounce Back schemes.

However, if your company has received a CBILS loan of up to £50,000 this might be able to be converted into a Bounce Back loan. You can apply to do this with your lender until 4 November 2020.

Similarly, if you receive a Bounce Back loan you may be able to apply to convert it to a CBILS loan if you require more aid, though this has still to be clarified.

What other support is available for SMEs?

• The Coronavirus Job Retention Scheme allows furloughed staff to receive up to 80% of their wages from the government during the crisis.
• The government is also paying for statutory sick pay if employees are struck down with the virus.
• Business rates have been scrapped temporarily for thousands of small firms.
• A range of articles are available on our coronavirus help and support pages.
• If your business is based in Scotland, Wales or Northern Ireland, you could be eligible for further support.

The above is intended as general information and does not constitute advice in any way. You should take independent advice if you have any questions about your specific circumstances.