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4 Min. Read

What Is a Bounce Back Loan Scheme (BBLS)?

What Is a Bounce Back Loan Scheme (BBLS)?

The Covid-19 crisis had a huge impact on businesses of all sizes across the globe.

The coronavirus pandemic cost small and medium-sized businesses an estimated £126.6 billion. This is double what business owners had initially predicted.

There are roughly six million SMEs in the UK. This accounts for over 99% of all businesses, 33% of employment and 21% of all turnover. So the £126.6 billion that was lost represents a sizable blow to the UK economy.

The bounce back loan scheme was introduced by the UK government to support businesses through the Covid-19 pandemic. Through this scheme, banks have lent over £38 billion to small businesses.

But what is the Bounce Back Loan Scheme? Let’s take a closer look.

Here’s What We’ll Cover:

What Is the Bounce Back Loan Scheme?

Am I Eligible for a Bounce Back Loan?

How Do I Apply for Funding?

How Can I Pay Back the Loan?

Key Takeaways

What Is the Bounce Back Loan Scheme?

UK Chancellor Rishi Sunak launched the Bounce Back Loan Scheme in April 2020. It was introduced as a scheme to provide financial support to businesses across the UK that are losing revenue due to the pandemic.

The scheme enables businesses to take out a loan from £2,000 up to 25% of their annual turnover. The maximum loan amount is £50,000. These loans come with a 100% government-backed guarantee.

The maximum term for a BBLS is 6 years and businesses won’t have to pay any interest on the loan for the first 12 months. After the first year has passed, they won’t have to pay more than 2.5% interest.

Am I Eligible for a Bounce Back Loan?

To be eligible for a BBL, you have to be based in the UK and have been negatively impacted by the coronavirus outbreak. There is also a list of criteria provided that you have to match.

You can apply for a loan if your business:

  • Has been impacted by the coronavirus pandemic.
  • Wasn’t in any form of difficulty as of 31st December 2019.
  • Is UK-based and has been operating since at least 1st March 2020.
  • Isn’t currently in bankruptcy or liquidation.
  • Isn’t undergoing debt restructuring.
  • Makes more than 50% of its income from its trading activities.
  • Isn’t in a restricted sector.
  • Is not already receiving funding under the Coronavirus Large Business Interruption Loan Scheme or the Bank of England’s Covid Corporate Financing Facility Scheme.

If you have already received a loan of up to £50,000 from one of the other schemes then the government will allow you to transfer it into the BBLS.

Businesses from any sector can apply for the loan. But you can’t apply if you are a:

  • Bank, insurer or reinsurer (except insurance brokers)
  • Public sector body
  • State-funded primary or secondary school.

How Do I Apply for Funding?

Businesses can apply for BBLS funding directly from their chosen bank’s website.

The British Business Bank has accredited 50 banks under the scheme. Most of these are regular high street banks including the UK’s five largest banks:

  • Barclays
  • HSBC
  • Lloyds
  • Santander
  • Royal Bank of Scotland

Businesses are encouraged to apply with their normal business bank.

How Can I Pay Back the Loan?

The Chancellor announced in 2020 that the BBLS would offer business owners increased flexibility to repay any loan. This was through a new government repayment system labelled ‘Pay as You Grow'.

Through this system, businesses who took out a loan through the BBLS are able to:

  • Extend the length of the loan from six years to ten.
  • Make interest-only payments for six months, with the option to use this up to three times throughout the duration of the loan.
  • Pause repayments entirely for up to six months.

Further information on accessing the scheme and the payback methods can be found on the government’s website.

Key Takeaways

Business owners should always be wary of taking on any kind of debt funding. Even when the funding is 100% government-backed, it’s still best to weigh up your options.

But if you decide that your business is in need of funding, then the Bounce Back Loan Scheme is a good option with low interest rates.

Are you looking for more business advice on everything from starting a new business to new business practices?

Then check out the FreshBooks Resource Hub.