bounce back loan scheme

Chancellor Rishi Sunak has confirmed changes to the Bounce Back Loan Scheme (BBLS) to allow businesses to repay the loans over a longer timescale.

The news will be welcome to many small businesses and the Chancellor hopes it will help stem the expected increase in insolvencies this year. Under the scheme, the government is liable for all of a bank’s losses if the indebted business collapses.

Around 1.4m small firms have borrowed an estimated £45bn using the Bounce Back Loan Scheme (BBLS). Repayments are due to start in May but struggling firms will now be able to choose interest-only payments or payment holidays for up to 6 months.

Under the new plans, dubbed “Pay as You Grow” firms will also be able to extend their repayment plan from six to 10 years to reduce monthly instalments.

Struggling businesses will also be able to choose interest-only repayments or payment holidays for up to six months.

The Chancellor of the Exchequer, Rishi Sunak, said:

Businesses are continuing to feel the impact of extended disruption from Covid-19, and we’re determined to give them the backing and confidence they need to get through the pandemic.

That’s why we’re giving Bounce Back Loan borrowers breathing space to get back on their feet, through greater flexibility and time to repay their loans on their terms.

About the Bounce Back Loan Scheme

The scheme helps small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover. The maximum loan available is £50,000.

The government guarantees 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. After 12 months the interest rate will be 2.5% a year.

The scheme is open to applications until 31 March 2021.

If you already have a Bounce Back Loan but borrowed less than you were entitled to, you can top up your existing loan to your maximum amount. You must request the top-up by 31 March 2021.

Extra time to repay

Lenders will proactively and directly inform their customers of Pay as You Grow from 8th February 2021, and borrowers should only expect correspondence three months before their first repayments are due. The initial length of the loan was six years but you can repay early without paying a fee. No repayments will be due during the first 12 months.

With the changes, businesses will now be provided with the following options:

  1. Extend the length of the loan from six years to ten (reducing monthly repayments by almost half)
  2. Make interest-only payments for six months, with the option to use this up to three times throughout the loan
  3. Pause repayments entirely for up to six months, meaning businesses can choose to make no payments on their loans until 18 months after they originally took them out. The option to pause repayments will now be available to all from their first repayment, rather than after six repayments have been made.

Eligibility for the Bounce Back Loan Scheme

You can apply for a loan if your business:

  • is based in the UK
  • was established before 1 March 2020
  • has been adversely impacted by the coronavirus

Those who cannot apply:

  • banks, insurers, and reinsurers (but not insurance brokers)
  • public-sector bodies
  • state-funded primary and secondary schools

If you’re already claiming funding:

You cannot apply if you’re already claiming under:

If you’ve already received a loan of up to £50,000 under one of these schemes you can transfer it into the Bounce Back Loan scheme. You have until 31 March 2021 to arrange this with your lender.

To help small businesses, we produced a post COVID-19 planning guide last year, including advice on finance, marketing, operations, people, IT, and customer service which can be found here.