‘Bounce Back’ Loan Scheme

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‘Bounce Back’ Loan Scheme

A new loan scheme focused on small and medium-sized firms was announced by the Chancellor on 27 April 2020, in response to concerns that the Coronavirus Business Interruption Loan Scheme (see below) was not working sufficiently well for the smaller business sector.  Under the Bounce Back loan scheme, loans of between £2,000 and £50,000 will be available interest-free for the first 12 months with a ‘low’ rate of interest being charged thereafter.  The amount of borrowing businesses are able to access under the scheme will be 25% of turnover, up to a maximum of £50,000. The loans will be 100% guaranteed by the Government and be repayable over a period of up to six years.

The Bounce Back loan scheme will open for applications from 4 May 2020. The application process is designed to be straightforward, with cash being released within a few days of a loan being approved.  This addresses two of the principal criticisms of the CBIL scheme, where many businesses ae reported to have been subject to lengthy application processes and delays in receiving funds.

To be eligible, the business must be based in the UK and have been adversely affected by the Covid-19 pandemic. The business must not be an ‘undertaking in difficulty’ at 31 December 2019, meaning broadly a company over three years old where more than half of subscribed share capital has disappeared as a result of accumulated losses.

Certain businesses in the insurance and financial sector are not eligible for the scheme, although insurance brokers may apply. Loans under the Bounce Back scheme are also not available to publicly funded businesses, schools etc. It is not possible for a business to have loans under both the Bounce Back and CBIL schemes, but those who have already received CBIL funding of up to £50,000 have the opportunity to switch to the Bounce Back scheme before 4 November 2020.

If you have any questions, please get in touch with your usual Newby Castleman LLP contact.