Bounce back loans
Introduced in May 2020, the Bounce Back Loan Scheme (BBLS) is designed to help small businesses to continue to operate under the restrictions imposed by COVID-19.
Qualifying businesses can apply for a loan of up to £50,000, a sum that is 100% state-sanctioned. For the first 12 months of the bounce back loan, no repayments are required and no interest is accrued.
Since it first hit, the coronavirus and its effects on businesses have become more onerous. Accordingly, BBLS terms and conditions have become more flexible. Since its instigation, companies have been given more time to apply for a loan – and a further six months have been added to the first repayment due date. And if you didn’t initially borrow the full £50,000, you have the opportunity to make up the difference with a top-up.
How much can I borrow?
The minimum figure available is £2,000, and as previously mentioned, £50,000 is the most a business can borrow. The actual amount you can borrow is determined by your total annual turnover (typically based on the 2019 financial year, though new businesses are permitted to estimate).
Please note that the borrowable amount is capped at 25% of your (calculated) turnover.
How long do I have left to apply?
Initially, the final date for application was 30 November 2020, which was pushed back to 31 January 2021, and again to the current end date of 31 March 2021.
Don’t delay
Please bear in mind that the majority of lenders request a background-check appointment. If you require a bounce back loan, apply sooner rather than later to avoid disappointment.
Bounce back loans – top-ups
As mentioned earlier, if you haven’t applied for the full amount (of up to £50,000), you still have time (until 31 March 2021) to apply for a top-up. The minimum top-up amount available is £1,000 while the maximum figure will depend on your business’ turnover.
Please note:
- Top-ups are only available from your original bounce back lender.
- The repayment and interest-free period for top-ups is based on the date of your initial bounce back loan. So if you took out the first loan on 1 September 2020, the interest-free period will end – and repayments will need to start – on 31 August 2021 (for both the original loan and the subsequent top-up loan).
Can I repay early?
Yes, and if you do repay in full ahead of time, you won’t incur a penalty. (Some lenders will allow you to repay part of the loan before the due date.)
What happens after 12 months?
If you haven’t repaid the loan in full before the 12-month period has elapsed, the remaining amount will accrue 2.5% annual interest, which will hold for a further nine years.
Is there a payment holiday option?
Yes. During the course of the loan you’ll be able to take one payment holiday, during which time your repayments will be paused (for up to six months). You also have the option to switch to interest-only payments for up to six months, and you can do so a maximum of three times.
For further information regarding the Bounce Back Loan Scheme, please visit https://www.gov.uk/guidance/apply-for-a-coronavirus-bounce-back-loan.
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