BBLS was a new funding route created by the UK government during the coronavirus pandemic. After UK businesses experienced struggles in accessing the financial assistance which they needed through the Coronavirus Business Interruption Loan Scheme (CBILS).
How the BBLS differs from the CBILS is that the government guarantees 100 pc of the loan (via BBLS), and a business can only access a maximum of £50,000.
According to the Financial Times, the Bounce Back Loan Scheme having only gone live on the 4th May 2020 had by the end of that day received some 100,000 applications, with the suggestion being that the average loan was £30,000.
Operated through the British Business Bank and its accredited lenders, the new BBLS facility offers:
- businesses the ability to access between £2,000 and up to 25 pc of their turnover (maximum of £50,000)
- the government guarantees 100 per cent of the finance to the lender
- the government pays the first 12 months of interest
- businesses don’t need to make any repayments for the first 12 months
- interest is capped at 2.5 pc
- the loan term is six years, but early repayments can be made without being penalised
How to apply for the BBLS funding route
1. To be eligible for The Bounce Back Loan Scheme?
The business needs to:
- be based in the UK
- have been operating before 1st March 2020
- have been negatively impacted by coronavirus pandemic
- make 50 pc of its income from trading activity
- not have been a ‘business in difficulty’ on 31st December 2019
- not already be claiming under the CBILS (although you can transfer loans of up to £50,000 under the CBILS to the BBLS until 4th November 2020)
- not be bankrupt, in liquidation, or restructuring debts at the time of application
Self-certification is required, by way of confirming the business meets the application criteria.
2. Approach the lender
Lenders taking part in the scheme include several high street banks – the British Business Bank has a full list of accredited partners.
Businesses should approach their current bank for finance in the first instance. However, whilst nothing is stopping them from going elsewhere if they can’t access the finance they need. Reports suggest that out of the 10 lenders taking part on day one, only HSBC was currently offering non-customers a loan.
Mike Cherry, Chairman of the Federation of Small Businesses (FSB), said the application process can vary from lender to lender: “Some have submitted their short application forms with no trouble at all, others have been told to wait for forms to arrive, and some have struggled to make an application due to site failures.”
3. Complete self-certification required
When applying for the BBLS, businesses need to self-certify that they’re eligible for the BBLS based on the criteria above. If a business is eligible to apply, the application will be subject to appropriate customer fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks by the lender.
4. The lender will make a decision
The approached lender will decide whether the finance can be offered. Unlike part of the CBILS criteria, the lender cannot ask for a personal guarantee (a personal guarantee being where an individual could be personally made liable for the loan if their business defaults on payments) additionally the loans are guaranteed 100 pc by the government.
Important to note: that whilst the lender can’t take recovery action on the primary vehicle or main home of sole traders or members of partnerships, the lender could potentially go after other personal assets.
Although the government guarantees 100 pc of the BBLS, the business remains liable for all of the debt and repayments.
If a business is turned down by a lender, they can still apply with a different lender.