What are Bounce Back Loans?

Bounce Back Loans are intended to provide financial support to businesses across the UK witnessing tight cash flow and falling revenues as a result of COVID-19 outbreak.

This means that your clients affected adversely due to the coronavirus can avail these loans at attractive rates.

Launched by the government and offering loans of between £2,000 and £5,000, Bounce Back Loans Scheme provides easy and quick way to access loans at a fixed interest rate of 2.5 per cent.

The cash for it is expected to land within days and the length of the loan is for a period of six years.

Undoubtedly, this can said to be a very useful loan scheme for the clients as the interest rate is quite low helping all the affected businesses in this time of need.

Here are some more features of this scheme:

  • Businesses can apply for these loans online through a short and simple form and it will be backed for the lenders completely by the government
  • Small businesses can apply to accredited lenders after answering only seven questions on the simple online form to get access to these loans
  • Businesses can apply to have any current COVID-10 Business Interruption Loan of £ 50,000 or less replaced by Bounce Back Loans.
  • Any fees and interest for the borrower for the first 12 months will be covered by the government
  • To put firms back on their feet, no repayments will be due during this time
  • The amount of loans shall be from £2,000 up to 25 per cent of a firm’s turnover or £50,000 – whichever is lower
  • A two-page application form will need to be filled by the borrowers in which they will make some certifications like having a sustainable business, lifting compulsion on lenders to carry out their own checks
  • No recovery action can be taken over a principal private vehicle or principal private residence along with permission for any personal guarantees
  • Forward financials or business plans will no longer be required by banks

Please note that there is no fee to access this scheme for either businesses or lenders which means more cost savings for your clients.

You can read up more here

Are your clients eligible for Bounce Back Loans?

Eligibility criteria for the business clients is mentioned below:

  • Needs to be established by March 1 2020 and should be UK-based
  • Should be negatively impacted by COVID-19
  • Should not already be receiving any state backed COID-19 loan support
  • Should not be undergoing debt restructuring, liquidation, or any bankruptcy

With that said, companies qualifying will still be subject to anti-money laundering (AML) checks, Know Your Customer (KYC), and standard customer fraud before finalizing any loans. In fact, applications shall be subject to some State Aid Restrictions.

Secondly, there should be 100% liability for the debt for the borrowing client.

Also, please note that the Bounce Back Loans Scheme does not apply to the following sectors

  • Organizations in the public sector
  • Primary and secondary schools funded by the State
  • Institutions offering Credits
  • Companies providing insurance

Where can your clients find Bounce Back Loans?

Accredited lenders and partners can be found across the UK on the British Business Bank Website here

They include:

How can the clients Apply for Bounce Back Loans?

Business clients will be required to fill in a short online application form on their lender’s website which self-certifies whether they are eligible for this facility.

Your clients should follow these steps to apply for this loan:

  1. Find a lender through British Business Bank Website here
  2. Approach a lender who will ask them to fill in a short online application form on their website which self-certifies whether they are eligible for this facility
  3. Wait for the lender’s decision who will decide whether to offer your clients finance or not

Please note that under this scheme, lender cannot take any form of personal guarantee or take recovery action over a borrower’s personal assets.

Also bear in mind that your clients can still approach other lenders in the scheme if one lender turns them down.

The government has designed Bounce Back Loans Scheme to be fast for lenders to process and easy for businesses to access.

Find more details here

How are Bounce Back Loans different to the Coronavirus Business Interruption Loans Scheme?

Bounce Back Loans differ from Business Interruption Loans Scheme in terms of personal guarantees and affordability rules.

Clients that apply for Bounce Back Loans Scheme can do so without the need to use personal guarantees and will not need to meet any affordability requirements.

This also means that the businesses will not have the usual protections available to them for loans under £25,000

Nevertheless, they will be responsible for the decision to borrow the money and not the lender.

Coronavirus Business Interruption Loans Scheme, on the other hand, can include personal guarantees for loans above £250,000 and requires lenders to show the loan is affordable.

This means businesses will be able to retain their statutory rights as they would for an equivalent form of borrowing.

Also, the process is more stringent and requires evidence that the client’s business is viable outside of this pandemic and can afford the monthly payments along with any debt already piled up.

How long is the Bounce Back Loan Scheme available for?

Presently, the scheme is available until 4 November 2020. However, the Government has the option to extend this.

Get in Touch

Just fill in your details here if your clients need help in making a bounce back loan application or wish to discuss some other matters.

Lanop Outsourcing Chartered Accountants and Tax Advisers for Small and Medium Accountancy firms.

We are your local Outsourcing Chartered Accountants and Tax Advisers based in Putney, London. We are expert XERO Accounting advisors and trusted business advisors in UK.

While we are based in South West London and Central London, our clientele is quite global and our staff is currently working remotely to serve our clients through active Zoom accounts all over UK.

As always, you can reach out to us anytime to discuss any financial, business or accountancy issues you may have in this coronavirus pandemic.