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New 100% government-backed loan scheme for small and medium-sized businesses

04 May 2020. Published by Sukh Ahark, Partner and Lauren Murphy, Senior Associate

The new 'Bounce Back Loans' scheme (the "Scheme") launches today. The Scheme provides small and medium-sized businesses with loans from between £2,000 and £50,000, such cash to be accessible within days.

This fast track-finance Scheme provides loans with a 100% government-backed guarantee for lenders. There won’t be any fees or interest for the borrower to pay for the first 12 months but thereafter interest will be levied at a flat rate of 2.5% per annum. No repayments will be due during the first 12 months and lenders are not permitted to take personal guarantees or take recovery action over a borrower’s personal assets (e.g. their main home or personal vehicle).

From 9:00am this morning, businesses can apply online through a short and simple form (with only 7 questions), which should hopefully ensure efficiency. The current list of accredited lenders is available here.

You can apply for a loan if your business:

  • is based in the UK
  • has been negatively affected by coronavirus

Eligible businesses will be subject to the standard customer fraud, anti-money laundering and know your customer checks before any loan is made. The borrower always remains 100% liable for the debt.

The following businesses are not eligible to apply:

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

You cannot apply if you’re already claiming under the Coronavirus Business Interruption Loan Scheme (CBILS). Although, if you’ve already received a loan of up to £50,000 under CBILS and would like to transfer it into the Scheme, you can arrange this with your lender until 4 November 2020.

This Scheme appears to seek to address some of the criticisms of other government COVID-19 funding such as speed/efficiency and high interest rates. The Scheme has been met with a warm reception, Mike Cherry, Federation of Small Businesses National Chairman, said: "This crucial new initiative should enable thousands of small businesses to access the working capital they need quickly, helping to protect the millions of jobs they provide in every part of the UK."