110,000+ small businesses apply for Bounce Back scheme
Small businesses within the UK will be allowed to take out loans up to £50k, with all loans guaranteed at the same interest rate
Small businesses received a boost from the UK Government on May 4 following the announcement of the Bounce Back Loan Scheme (BBLS).
On the first day the scheme was live, more than 110,000 BBLS applications were filed, according to the Financial Times.
Under BBLS, UK small and medium enterprises (SMEs) who have been adversely impacted by coronavirus can apply for a six-year loan between £2k and £50k, featuring a 2.5 percent interest rate.
“Many of Britain’s SMEs are really struggling financially in the current crisis,” Rob Hattrell, vice president of eBay UK, said in a statement. “Hopefully, this move from government will help our very smallest businesses get the financing they need quickly to manage their cash flow and replenish their stock.”
These loans, delivered by British Business Bank lenders, are 100 percent backed by a Government guarantee against the loan’s outstanding balance. The Government will also cover the first 12 months of interest payments with a business interruption payment.
Additionally, no principal repayments will be due within those 12 months; however, the debt incurred will continue to be the borrower’s responsibility.
“By removing risk-based loan pricing and setting the interest rate on all bounce back loans at 2.5 percent, the chancellor has further simplified the process for banks to issue the loans as it is effectively only eligibility that needs to be checked,” Mark Neath, director at advisory firm Old Mill, said in a statement. “This ought to facilitate the promised fast turnaround.”
To be eligible for BBLS, businesses must be UK-based, not currently receiving a Government-backed coronavirus loan scheme, and have been established by March 1, 2020. Additionally, eligible businesses cannot be in liquidation, bankruptcy or be actively restructuring debt.
The British Business Bank suggests that potential borrowers approach their lenders themselves, warning that the volume of applications may make phone lines busy. If borrowers are rejected from one bank, they can still solicit other lenders within the scheme.
“Banks have been operating at full throttle and must stay in overdrive to get more money out of the door faster,” said Rain Newton-Smith, chief economist at the Confederation of British Industry, in a statement. “Time is of the essence.”
