What is Bounce Back Loan Scheme for companies in UK? WATCH NOW!

Amidst all this came the Bounce Back Loan Scheme, The Bounce Back Loan Scheme is a government initiative to support small and medium-sized businesses. The government provides lenders like NatWest with a guarantee for 100% of the loan, with the borrower remains liable for all of the debt.

As per this new bouce back loan scheme Small companies in the UK can apply for so-called "bounce back" loans of up to £50,000 from 9 am on Monday.

Final details of the government's bounce-back lending scheme have been agreed between the Treasury and the banks that will supply the credit over the weekend, and borrowers expect applications to flood this week.

Chancellor Rishi Sunak’s latest rescue initiative for corporate Britain involves the government offering a 100 per cent guarantee on the bounce back loans to give banks the confidence to advance cash to businesses quickly.

The move comes after strong criticism by companies of the government’s coronavirus business interruption loan scheme, aimed at small and medium-sized enterprises.

With that’s lets answer some simple questions around the same.

Who can apply for bounce back loans and what are the terms?

Companies of any size can apply, but they are aimed at small businesses with fewer than 10 employees and at the UK’s 900,000 sole traders.

You must have been trading on March 1 2020 and must not have been an “undertaking in difficulty” as of December 31 2019. Any individual other than a sole trader or a partner acting on behalf of a partnership cannot apply.

Mike Cherry, chair of the Federation of Small Businesses, said the coronavirus business interruption loan scheme (CBILS) “has not worked for the small firms that make up 99 per cent of our business community. The new bounce back facility offers real hope in this space”.

Under the scheme, companies can borrow between £2,000 and £50,000 for up to six years. Businesses can borrow a maximum of 25 per cent of their turnover.

The government will cover interest and fees on a loan for the first year. Businesses start their loan repayments after 12 months, and the interest rate will be 2.5 per cent.

Coming to How is a bounce back loan obtained?

The same 50-plus lenders accredited by the British Business Bank, the state-owned financial institution, to provide coronavirus business interruption loans are also expected to offer bounce back loans.

Companies seeking a coronavirus business interruption loan have complained about lengthy delays with the application process and stringent qualification criteria.

By contrast, applicants under the bounce back loan scheme will have to fill out a simple online form which will ask for details such as annual turnover, bank account number, the amount of credit sought, and whether the business has been adversely affected by the virus. You do not have to offer security or personal guarantees.

Nor do applicants have to stick with their existing lenders. Although the big five banks are responsible for the majority of lending, there are likely to be plenty of alternatives. These include peer-to-peer platforms such as Funding Circle, and SME lending specialists like Newable.

Stephen Jones, chief executive of UK Finance, the trade body for banks, said: “Lenders are working at pace to get the [bounce back loan] scheme up and running and we hope to see an increasing number of firms accredited from across the broad and diverse lending community to ensure [the scheme] is available to as many small business customers who wish to borrow under the scheme as possible.”

As the crisis means the need to deliver cash to firms is urgent, as part of attempts to reduce fraud, HM Revenue & Customs must perform retrospective checks on applicants for bounce-back loans. When borrowers default on loan repayments and cause the government guarantee, it would be much more likely.

A very important question is How quickly will banks be able to make a decision on a loan application and provide the money?

Companies who apply to a lender with whom they already have a business account should expect to receive the loan within days.

For companies applying through new accounts, or which are approaching a new lender, it will take slightly longer, but banks said they will work to process these loans as quickly as possible.