Knowledge from Crunch - love accounting

Coronavirus Bounce Back Loan Scheme – guide to the scheme and making a claim

Posted by Jake Smith on May 5th, 2020 | Running a business

Coronavirus Bonce Back Loan - guide for the self-employed | Crunch - image of a freelancer

On 27th April 2020 the Chancellor announced a new Coronavirus Bounce Back Loan Scheme aimed at businesses needing to access funding due to the Coronavirus Pandemic. The scheme is available to limited companies and sole traders.

The scheme is designed to provide quick access to cash to help with business continuity. We’ve put together this guide to help you make a claim.

Please note Crunch cannot apply for a loan on your behalf.

Background to the scheme

The Coronavirus Bounce Back Loan Scheme (BBLS) went live on 4th May 2020.

The scheme was established because the government was concerned many businesses were struggling to secure financing from the Coronavirus Business Interruption Loans (CBILS) announced on 20th March and needed quick access to resources to ensure business continuity.

The scheme is targeted at small and medium-sized UK Businesses who have been negatively affected by the coronavirus pandemic. It is designed to provide quick and efficient access to a business loan of between £2,000 and £50,000 to be paid back over up to six years.

The loans may be particularly useful for otherwise viable businesses who do not qualify for the other grants available such as the Coronavirus Job Retention Scheme or the Self-Employed Income Support Scheme.

The Government will guarantee 100% of the loans and there are no fees or interest to pay in the first 12 months, with no repayments due in this period. The government has also agreed with lenders that an affordable flat rate of 2.5% interest will be charged on these loans for the remainder of the loan term after 12 months.

Who can claim?

Your business must be able to self‑declare to the lender that it:

  • has been impacted by the coronavirus pandemic
  • was not a business in difficulty at 31 December 2019
  • is engaged in trading or commercial activity in the UK and was established by 1 March 2020
  • is not using the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) or the Bank of England’s Covid Corporate Financing Facility Scheme (CCFF), unless the Bounce Back Loan will refinance the whole of the CBILS, CLBILS or CCFF facility
  • is not in bankruptcy or liquidation or undergoing debt restructuring at the time it submits its application for finance
  • derives more than 50% of its income from its trading activity
  • is not in a restricted sector (see the British Business Bank website for details of restricted sectors).

Individual lenders may apply further tests.

How do you claim?

Loans are provided by individual banks who are accredited by the government through the British Business Bank. Businesses must apply online using a seven-question standardised application form.

Guidance on how to apply is provided on the British Business Bank website.

You need to choose a lender from the list on the British Business Bank website. Each lender may have a slightly different application process. You may find it faster to approach your own business bank provider if they are on the list. If you are turned down by a lender. you can apply to another lender on the list.

Supporting documents

You’ll need to provide documents that show you can afford to repay the loan. These will vary from lender to lender based on the amount of loan you are seeking. HMRC expects the documents you will need may include:

  • management accounts
  • cash flow forecast
  • business plan
  • historic accounts
  • details of assets.

If you’re a Crunch limited company client, to help you submit an application we’ve prepared an article on how to access filed accounts, management information and trial balances from your Crunch account which you may need to support your application.

If you do access a Bounce Back Loan for your limited company then here’s how to record a company loan in your Crunch software.

If you operate as a sole trader, the BBLS loan will effectively operate as a personal loan. You take the money directly, and are personally liable to repay it.

If the lender turns you down

If one lender turns you down, you can apply to other lenders in the scheme. You may want to consider using a broker to find the right type of finance for your needs, or do your own research using the British Business Bank’s finance guide.

Should I take out a loan?

This is something that needs careful thought. The rate of 2.5% is far cheaper than a typical business loan. The opportunity to have 12 months interest and fee-free, is certainly attractive. But of course, as with any loan, it does need to be paid back in full and you need to be sure that your business will be able to afford the loan repayments. If you operate as a sole trader, the BBLS loan must be repaid by you personally.

You do not need to prove the viability of your business, so most businesses should be able to access a loan if they wish. If you have existing finance for your business that is more expensive, using the BBLS to pay these off could save you money. Though you will need to look at all of your business’s debts if you add a further liability.

The BBLS is designed to provide immediate working capital to your business. This means you can use it to pay staff, creditors and your business running costs. The government has set some rules you need to follow. You can use a loan to support your income, but you can’t use it to pay dividends (unless there is a profit on your balance sheet and you don’t have the cash to pay it out as a dividend). You can use the loan to pay salaries, but not to increase them.

The Bounce Back Loans do not affect your eligibility to other government support. As long as you believe you will be able to repay the loan, it is a very useful addition to the range of support available to businesses from the government.

We have more information on the support available to business and the self-employed on our COVD-19 Hub.

Build your own online accountancy package

Join 11,000 clients who trust our advice, support, and leading accountancy software for their business. Choose exactly what accountancy support you need with our new tool and get a quote in 60 seconds.

Join Crunch Chorus:
The free community for the self-employed

You'll get access to a range of benefits, such as invoice software, jargon-free business guides, great networking opportunities, discounts, plus much more

Useful tools and resources

Business guides

From understanding expenses to starting a limited company, we've a range of jargon-free business guides for you to download and keep.

Invoicing software and templates

Create, send and store sole trader invoices in a snap with our free invoice software. You can also download a selection of invoice templates for all business types.

Take-home pay calculator

Use our Take-Home Pay Calculator to work out your true earnings and see if you could save money with a different company set up.

Need help with your accountancy?

Join 11,000 clients who trust our advice, support, and leading accountancy software for their business. All the support and advice you need, wherever you need it. Speak to an expert today on 0333 311 0800 to find out more about our bespoke packages.

    Find out more