From 4 May 2020 businesses are able to apply for government-backed loans under the Bounce Back Loan Scheme (BBLS).
The BBLS is 100% backed by the government and is intended to be a quick and easy way for small businesses to access loans of between £2,000 and £50,000 (and only up to 25% of the company's annual turnover). Importantly, the government will also cover the cost of any fees and interest for the borrower for the first 12 months and the interest rate is fixed thereafter at 2.5%. The application process involves just seven questions, which include confirmation that the business was not in "difficulty" as at 31 December 2019 and that it has been impacted by the COVID-19 pandemic.
It is thought that access to BBLS will be more attractive to small businesses who have viewed the Coronavirus Business Interruption Loan Scheme (CBILS) application process as being too slow to be of genuine assistance to businesses already feeling the pressure of the pandemic. Banks were said to be applying their usual loan criteria to CBILS applications, which was making it difficult for small businesses to access cash quickly.
Indeed, the relative popularity of the BBLS is reflected in initial figures which indicate that the total sum to be loaned by banks in the first day of the BBLS was in the region of £3.3bn (compared with £4.1bn distributed in the first 5 weeks of the CBILS). More than 110,000 businesses applied for a loan under the BBLS on the first day.
The availability of the BBLS to small businesses must come as a huge relief - access to quick cash without immediate repayment obligations will be critical to small businesses as, even when lockdown lifts, it is quickly becoming apparent that people will not rush back into their old spending habits and it may take some time for businesses to recover the custom that they were reliant on before the pandemic hit.
More than 110,000 small businesses applied for low-cost finance on the first day of the UK’s “bounce back” loan scheme, underlining the demand for credit to survive the coronavirus lockdown.