More than one million small businesses have successfully applied for a government-backed Bounce Back loan since the scheme was introduced at the start of May, according to figures from the Treasury.
The initiative has handed out loans worth more than £30 billion as SMEs attempt to drive their businesses forward during these testing times.
Business Secretary Alok Sharma said the Bounce Back Loan Scheme (BBLS) has helped “businesses to get back on their feet”, adding that the government will continue to support SMEs as they look to level-up in the coming weeks and months.
The BBLS is one part of the government’s package of business support which also includes the Job Retention Scheme and the Coronavirus Business Interruption Loans Scheme, which we covered in a previous blog.
Who is the BBLS available to?
UK-based businesses can apply for a loan through the BBLS provided it was established before 1 March 2020 and has been adversely impacted by the coronavirus. Eligible SMEs can borrow between £2,000 and up to 25% of their turnover. The maximum loan available is £50,000.
Operated and administered by the delivery partners of the British Business Bank, the scheme is open to businesses from any sector, bar a select few. A business cannot apply for a Bounce Back Loan if it is already claiming under CBILS.
The government guarantees 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. After 12 months the interest rate will be 2.5% a year.
As the BBLS is intended to be a temporary response to the COVID-19 pandemic, it will initially be open until 4 November 2020. However, the government have extended the scheme to 31 March 2021.
How easy is it to obtain finance through the scheme?
Bounce back loans were billed as being easy to apply for and quick to receive the funds. But has the proved to be the case?
It’s fair to say that businesses have had a mixed experience with the scheme.
As of 2 August, the Telegraph reported that almost 250,000 of the 1.4 million applications for Government-supported "bounce back" loans were either still being processed or had been declined.
The suggestion from the newspaper was that lenders were struggling to fast track applications, with Ed Miliband, shadow business secretary for the Labour Party stressing that the delay was causing “serious issues for businesses”.
However, it’s clear that many businesses have managed to access finance through the scheme, with lenders said to be “working tirelessly” to process applications.
Diana Reid, Founder of The Shortbread Company, and a beneficiary of the loans scheme, said that she found applying for a bounce back loan “a quick and simple process” which took less than 10 minutes, and funds were in her business’ account within 48 hours.
Meanwhile, Helen Williams, Owner of Willow Bridal Boutique, added that accessing a loan through the scheme has enabled her business to pay some of its supplier invoices.
“This has covered both our own stock items, but more importantly to us it has paid for some of our brides’ own wedding gowns which were due for delivery,” she added.
Will a personal guarantee be required?
A Personal Guarantee is – in a nutshell – a person’s promise to repay credit issued to their business (they’re usually a director or partner of the business) and is typically signed during the loan application process. It’s a legally binding contract.
However, not all finance products will require a personal guarantee. For example, personal guarantees are not allowed for Bounce Back Loans.
If you seek finance and are required to provide a personal guarantee, you might want to consider taking out personal guarantee insurance. Designed to give you the confidence to grow your business through securing crucial finance, and protect your personal assets, personal guarantee insurance leaves you to get on with running your business.