Businesses are struggling to get back on their feet after the damage done by the global pandemic. The revenue of small businesses, in particular, has taken a severe hit, due to which they’re facing a disruption in cash flow. After seeing the plight of these businesses, the UK government announced a Bounce Back Loan Scheme (BBLS) to alleviate this financial crisis.

Here are all your questions about Bounce Back loans, answered:

What are bounce back loans?

The Bounce Back Loan Scheme that was launched on May 4’ 2020, aims to aid small businesses to sustain themselves in the market. These are easy access loans ranging from £2000 to £50,000. Once approved, you’ll be handed over the money only within a few days. Bounce Back Loans are completely government-funded for lenders, and the application process is quick and hassle-free.

What is the bounce back loan eligibility criteria? 

You will be eligible to file a Bounce Back Loan application if:

  1. Your business is established in the UK
  2. You started your firm before March 1’ 2020
  3. Your business has been gravely affected by the Coronavirus pandemic

In the event that your business was in the ‘business in difficulty’ category before Dec 31’ 2019, you will need to ensure that you are abiding by the additional state aid restrictions.

Who can and cannot apply?

Any businesses meeting the eligibility criteria, except for banks or insurers, public sector bodies, government-funded schools. You will also not be eligible for this loan if you’re already getting funded via one of these schemes:

  1. Coronavirus Business Interruption Loan Scheme (CBILS)
  2. Coronavirus Large Business Interruption Loan Scheme (CLBILS)
  3. COVID-19 Corporate Financing Facility

However, those who have already received money up to £50,000 through one of these schemes, can arrange with their lender to transfer it to BBLS before November 4’ 2020.

How to apply for a Bounce Back Loan? 

You can avail a Bounce Back Loan through a board of lenders accredited by the British Business Bank, as per their website. As of now, there are 26 lenders on the accredited lenders board, of the likes of Santander, AIB, Lloyd’s Bank, HSBC UK and Starling Bank. All you need to do is fill a brief online application form with a self-declaration of your eligibility for this loan. Lenders will require basic information like the Company’s name, registration details and turnover. Now the lender will assess whether you’re eligible for this loan, or a different type of finance that could help you better.

How much bounce back loan can I get?

The cap on Bounce Back Loans is £50,000. A business can file a loan worth of up to 25% of their annual turnover, at a fixed rate of 2.5%. The government will fund the repayment of this loan for the first 12 months. HSBC UK offers this loan for a tenure of 6 years, with zero charges levied on early repayment.

What can the bounce back loan be used for?

There are various ways a Bounce Back Loan can become your savings grace. However, lenders clearly mention in their application forms that these loans should count towards the economic well-being of the business, not personal usage. We have listed down a few ways to use BBLS, just to give you an idea:

  1. Use BBLS to cover your investment costs – bills, wages or debt.
  2. Use BBLS to invest in your business for expansion
  3. If you have the resources, use it increment wages of employees and help them mitigate their struggle
  4. Improve general cash flow with a BBLS

If you don’t get the response you expected…

A lender may turn you down based on your profile. However, you can always apply to other lenders on the accredited lenders list, as you may be a better fit for another lender. You can always consider a broker service to help you find the right type of finance for yourself.

Small businesses are a significant part of the economy. They create a number of job opportunities for a variety of sectors. Given the ongoing economic crisis, securing them is important, as they are the ones that are struggling to recover. Therefore the BBLS scheme is an excellent opportunity for suffering small businesses to get a grip.