During the initial peaks of the pandemic, the UK government introduced a new fast-track SME loan scheme. The scheme aimed to provide respite to small and medium businesses adversely hit by the novel coronavirus pandemic.
Bounce back small business loan – 100% government backed business loan
Under this scheme, small business owners could borrow £2,000 and £50,000 from banks and access cash quickly. These loans were be interest free for the first 12 months with a 100% government backed guarantee for lenders.
Rishi Sunak, UK’s Chancellor of the Exchequer told that there would be, “no forward-looking tests of business viability; no complex eligibility criteria.” Businesses applied online through a succinct form. He also said that this scheme would further bolster the already existing package to support SMBs that are struggling in wake of the pandemic.
Who was eligible for this bank loan for business?
Businesses from all sectors are eligible to apply for the bounce back loan with relatively simple conditions.
The business should be based in the UK.
The business should have been established before March 1st, 2020.
The business should have been adversely affected by the COVID-19 pandemic.
The following were not eligible to apply:
State-funded primary and secondary schools
Bankers, insurers, and reinsurers except insurance brokers
Businesses that are already claiming funding for either Coronavirus Business Interruption Loan Scheme (CBILS), or Coronavirus Large Business Interruption Loan Scheme (CLBILS), or COVID-19 Corporate Financing Facility are not eligible for the bounce back loan scheme.
If businesses have received a loan of up to £50,000 under any of the schemes above but want to avail the Bounce Back scheme, they could transfer it.
What is the duration of the loan?
The loan was being offered for 6 years. It can also be repaid early without paying a fee, and no repayments shall be due during the first 12 months. A total of 11 lenders participated in the scheme and it was their discretion to deem a business fit for the loan. Should a lender turn a business down, they can apply to other lenders. The business will, however, be responsible for repaying 100% of the amount borrowed.
The Chancellor of the Exchequer, Rishi Sunak, said, “Our smallest businesses are the backbone of our economy and play a vital role in their communities. This new rapid loan scheme will help ensure they get the finance they need quickly to help survive this crisis. This is in addition to business grants, tax deferrals, and the job retention scheme, which are already helping to support hundreds of thousands of small businesses.”
It is important to note that many business have been able to utilize these loans and as of right now, many have been given options on flexible loan repayments depending on the lender.