Bounce Back Loan Scheme (BBLS)
The COVID-19 pandemic has brought unprecedented challenges to the UK’s business community. One of the measures introduced by the government to help businesses weather the storm is the Bounce Back Loan Scheme (BBLS). This scheme was launched in May 2020 and provided businesses with loans of up to £50,000.
Current State of the Bounce Back Loan Scheme
The Bounce Back Loan Scheme was originally due to end on 31 March 2021. However, due to the ongoing impact of the pandemic on businesses, the government extended the scheme until 31 December 2021. This meant eligible businesses could still apply for a loan until the end of 2021.
As of February 2023, the Bounce Back Loan Scheme is closed to new applications. However, businesses already receiving a loan under the scheme can still access additional support, such as the Pay As You Grow (PAYG) repayment options.
What Businesses Need to Know About the Bounce Back Loan Scheme in 2023
If your business has already received a Bounce Back Loan, there are several things you need to know in 2023:
1. Repayment of the Loan
Repayment of the Bounce Back Loan will begin 12 months after the loan was taken out. This means that businesses that received a loan in May 2020 will start making repayments from May 2021. The loan term is six years, meaning businesses have up to five years to repay the loan.
Under the PAYG options, businesses can reduce their monthly repayments or take a repayment holiday for up to six months. This can be done up to three times during the loan term. However, it’s important to note that interest will still be charged during any repayment holiday.
2. Interest Rates
The interest rate on the Bounce Back Loan is fixed at 2.5% per annum. This means businesses will pay the same amount of interest throughout the loan term. There are no early repayment fees, so businesses can repay the loan anytime without incurring additional charges.
3. Loan Limits
The maximum loan amount under the Bounce Back Loan Scheme is £50,000. However, businesses can only borrow up to 25% of their turnover, up to a maximum of £50,000. This means that businesses with a turnover of £200,000 or less can only borrow up to £50,000.
4. Impact on Credit Score
Taking out a Bounce Back Loan will not affect a business’s credit score, provided that the loan is repaid on time. However, if a business misses a payment or defaults on the loan, this will be recorded on their credit file and could impact their ability to access credit in the future.
Coronavirus Business Interruption Loan Scheme
Also introduced was the CBILS (Coronavirus Business Interruption Loan Scheme), a government-backed loan to provide lending up to £5m for small to medium-sized businesses that have experienced business disruption and cash flow problems as a result of the pandemic.
The scheme allows the lender to offer credit facilities underwritten by a government-backed guarantee which enables most credit decisions to become accepted. Additionally, the loan interest is also covered for the first 12 months from the date of drawdown of the loan.
There is no requirement to provide security against the loan or a personal guarantee for loans up to £250,000. Some lenders may request security for loans over £250,000 by way of a guarantee, but this cannot be secured on a Directors’ private property, and is only required for 20% of the lend.
Current Status of Coronavirus Business Interruption
The CBIL scheme officially ended on 31 March 2021, and businesses can no longer apply for new loans or other forms of financial assistance under this scheme. However, the government has introduced a new scheme called the Recovery Loan Scheme (RLS) to provide financial support to businesses impacted by the COVID-19 pandemic. The RLS scheme is set to run until 31 December 2023, providing businesses with access to loans, overdrafts, asset finance, and invoice finance facilities.
What Businesses Need to Consider If They Have an Outstanding Loan
Businesses with outstanding loans under the CBILS scheme must be aware of their repayment obligations. The government initially provided a 12-month interest-free period on CBILS loans, which has now ended. Businesses are now required to repay their loans, including any accrued interest.
If your business is struggling to make repayments, you should contact your lender as soon as possible to discuss potential repayment options. The government has introduced a range of measures to support businesses, including the option to extend the repayment term of the loan, make interest-only payments for a period of time, or request a repayment holiday.
It is important for businesses to remember that the loan provided under the CBILS scheme is a debt that needs to be repaid, and failure to make repayments can lead to severe consequences, including legal action and damage to the business’s credit score.
The payment terms for CBILS loans depend on the lender and the specific loan agreement, but generally include the following:
- Loan amount: The maximum loan amount under CBILS is £5 million, but the actual amount available to a business will depend on their financial circumstances and the lender’s criteria.
- Interest rates: The interest rates for CBILS loans are set by individual lenders and may vary depending on the type of loan, loan amount, and the risk assessment of the business.
- Repayment term: The repayment term for CBILS loans can be up to 10 years for term loans and asset finance facilities and up to three years for overdrafts and invoice finance facilities.
- Repayment holiday: Some lenders may offer a repayment holiday, which means that businesses can defer their loan repayments for a certain period of time.
- Security: Lenders may require security for the loan, which can be in the form of a personal guarantee, a charge over assets, or a combination of both.
- Fees: Lenders may charge fees for arranging and managing the loan, which can include application fees, legal fees, and early repayment fees.
It’s important to note that while CBILS loans are backed by the government, they are not grants and will need to be repaid with interest.
The UK Coronavirus Business Interruption Loan Scheme and Bounce Back Loan Scheme have provided much-needed support to businesses and SMEs during the COVID-19 pandemic. However, as we move into 2023, the schemes have officially ended, and businesses with outstanding loans need to be aware of their repayment obligations.
If you’re unsure how to manage your Bounce Back Loan or CIBL, seeking professional advice is important. You may want to speak to an accountant or financial advisor to help you plan for loan repayments and manage your finances more effectively.
Fortis are on hand to discuss any queries you have about either loan. Our initial conversation is completely free and strictly confidential.