As the Covid-19 pandemic continues to sweep the globe, businesses from all over the country have experienced a considerable reduction in their income. While it may be easier for large businesses and multinational corporations to mitigate the effects of the pandemic, smaller businesses may not be able to recover without help. As a result, the government has developed a BBLS, short for “bounce back loan scheme”. These loans are designed to help small and medium-sized businesses access financial support during the Covid-19 pandemic. Getting the loan is not particularly difficult, however, the information related to it is rather scarce. This having been said, we will look at who can gain access to a BBLS, what it offers, and what to do if a business is not found eligible.
What Is a Bounce Back Loan Scheme?
A BBLS is a lending scheme that enables small and medium-sized businesses to borrow between £2000 and 25% of their turnover. There is also a £50,000 upper limit that borrowers need to consider when applying for the scheme. One of the biggest advantages of a BBLS is the fact that the funds are entirely guaranteed by the government. Furthermore, the borrower does not have to pay any fees or interest in the first year. Once 12 months have passed, the company will be charged a yearly interest rate of 2.5%. It is also important to mention that if a company has used the scheme in the past, but has not borrowed enough money to reach the upper limit, it is possible to re-enrol in the program and gain access to more funds.
Lastly, please keep in mind that the program is only available for a limited time. While this limit is subjected to change, depending on the course of the pandemic, the current deadline is January 31st, 2021.
What Are the Eligibility Conditions?
The eligibility conditions for the BBLS are relatively clear. To apply for the program, a company must:
- Be based in the United Kingdom;
- Have been created before 31 Dec 2019;
- Have been negatively impacted by the Covid-19 pandemic;
The authorities have also specified several restrictions that entrepreneurs must take into consideration. Generally speaking, the program is not available to banks, insurers, reinsurers or any public sector body. Furthermore, primary and secondary schools that are funded by the state cannot qualify for the BBLS.
What Are the Benefits of the Bounce Back Loan Scheme?
The loan scheme enables companies to get a loan that has a standard length of 6 years and can be repaid early without having to pay any fees. It is also important to keep in mind that this term can be extended by another 4 years, and the repayments can be put on hold for a maximum of 6 months, provided that the borrower has made a minimum of 6 repayments).
What Happens If a Lender Turns You Down?
The Bounce Back Loan Scheme is offered by a large number of lenders, however, each of them is free to assess the eligibility of potential borrowers. If a lender does not find your company eligible for the program, consider getting in contact with another lender or using the services of a broker to find other ways to find appropriate financing. Keep on mind that a business cannot apply for the Bounce Back Loan Scheme if it is already claiming under CBILS, CLBILS, or the Covid-19 Corporate Financing Facility. Furthermore, if a business applies to the BBLS and gets approved, then it will no longer have access to the other programs mentioned above.