How do I apply and get one of Rishi Sunak's Bounce Back Loans for my small business?

What is the bounceback scheme and who is it for?

The Bounce Back Loan Scheme was launched by chancellor Rushi Sunak after complaints his previous scheme, the Coronavirus Business Interruption Scheme, was not accessible to too many businesses who needed loans to get over their immediate cash flow problems. The scheme offers loans of £2000 to £50,000 to small businesses and should provide money within days. Loans are 100% backed by the government, unlike the CBILS loans which were only 80% backed. This should make it less risky for the banks, who are administering the scheme.

So who qualifies and who doesn’t?

Your business must be small (around 10 or fewer), based in the UK and have been negatively impacted by the coronavirus.

The scheme is not available to banks, insurers and reinsurers (although insurance brokers may apply), or any body in the public sector.

How much interest do I have to pay?

As with the CBILS scheme, the first year is interest free. The Bounce Back loan then goes up to 2.5% and runs for a term of six years. There are no set up or application fees and no fees for early repayment. Nobody is looking to make a profit out of these.

Can anyone apply for the top level of £50,000?

No, you can only apply for up to 25% of the turnover you had in the 2019 calendar year.

I already got approval for a CBIL loan but I'm paying more than 2.5%. Can I switch to a bounce back loan?

Yes, until November you can switch from one to the other. In fact, if it's under £50,000, you should. But banks are asking that if you do decide to switch, don’t apply straight away because they are already swamped with thousands of applications from new customers in desperate need.

Can I keep my CBIL loan and add a Bounce Back Loan to it?

No! Nor can you get a Bounce Back Loan if you’ve already got a Coronavirus Large Business Interruption Loan, or the Bank of England’s Covid Corporate Finance Facility Scheme unless you’re using it to repay the other covid loan.

I’m going through a bankruptcy scheme at the moment. Can I still apply and try and save my business?

No, you won’t qualify for a Bounce Back Loan if you’ve already started down that route. Likewise, if you’re going through a debt restructuring process.

I’ve heard it’s “100 state guaranteed”. What does that mean for me?

Not much. The state guarantee is there to cover any losses the banks may make from borrowers who can’t pay the loan back.

What are the pitfalls?

The biggest factor to consider is that this is a loan, not a grant. If you are in financial difficulties as a result of coronavirus, you have to ask yourself if you honestly want to be taking on more debt at this time. You will have to repay the money and make the interest payments, even the cost of borrowing is low. Have you exhausted all other avenues for finance and cut your overheads as far as possible before getting further into debt?