When the Chancellor announced new Coronavirus Bounce Back Loan for small businesses this week, there was instantly a great deal of interest. While a few (16,000 odd) Coronavirus Business Interruption Loan Scheme (CBILS) have been issued, for many businesses they were simply too difficult to access and banks were accused of only lending with government backing to those they would have lent to on normal terms.
So what’s different about the Coronavirus Bounce Back Loan and why are small businesses more excited about them? Well firstly, for many businesses, when you tell them that CBILS are available with loan amounts of up to £5 million they immediately think that’s for large businesses. The Coronavirus Bounce Back Loan facility is for between £2,000 and £50,000 and just by starting at such a low level with a reasonable upper limit makes them sound more applicable to many small businesses.
The second important difference is that the government will guarantee 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. Loan terms will be up to 6 years with no repayments due during the first 12 months. The government will work with lenders to agree a low rate of interest for the remaining period of the loan. With CBILS the terms were similar but the government only guaranteed 80% of the loan and that meant the banks were keen to ensure loans were likely to be repaid – they are already struggling with the likelihood that a ton of outstanding loans from before the coronavirus crisis hit will now be defaulted.
The big difference with the 100% government guarantee is that there will be no judgement as to the viability of your business. That’s been a sticking point for CBILS – The reason many need an influx of cash at the moment is precisely because they’re in trouble and so unattractive to banks. The only requirements for You can apply for a Coronavirus Bounce Back Loan is that you’re a UK based business which has been negatively affected by coronavirus and that your business was not an ‘undertaking in difficulty’ on the 31st of December 2019. There will of course still be basic fraud checks but the aim is to get cash flowing to keep small businesses afloat.
Finally it’s worth noting that you can’t apply for a Coronavirus Bounce Back Loan if you’re already applying for a CBILS. However, if you haveve already had a loan of up to £50,000 under CBILS you transfer it into a Coronavirus Bounce Back Loan until the 4th of November 2020.
Applications for a Coronavirus Bounce Back Loan will open this coming Monday, the 4th of May, at 9am with funds expected into your bank account within 24 hours of the loan being approved.