On 27th April 2020 in the House of Commons the Chancellor announced a new scheme to help small businesses.

Whilst acknowledging “that some small businesses are still struggling to access credit” he also recognised that “..some businesses will not want to take on more debt; which is why our focus has been on cash grants, tax cuts and tax deferrals. But for others, loans will be part of the answer.”

So, the Government have introduced a new micro loan scheme known as the ‘Bounce Back Loan’ which they are confident will provide a simple, quick, and easy solution for those in need of smaller loans.

It looks a very good deal! However, one big proviso is the 100% guarantee – does that mean no personal guarantee at all?

The Coronavirus Business Interruption Loan Scheme (CBILS) carries an 80% government ‘guarantee’. In actual fact the directors will be providing a 100% PG and the 80% only kicks in after ultimate personal default! We have more information about the CBIL’s scheme at the bottom of the article.

However, we should be able to clarify this important guarantee point by this coming Monday 4th May 2020 – when the scheme launches.

Here are the known details:

New Bounce Bank Loan Scheme

  • Eligibility
    • small and medium sized businesses
    • is based in the UK
    • has been negatively affected by coronavirus
    • was not an ‘undertaking in difficulty’ on 31 December 2019
  • Loans available from 9am Monday 4 May 2020
  • Loans up to 25% of turnover but not more than £50,000
  • 100% Government loan guarantee
  • There will be no forward tests of business viability
  • No complex eligibility criteria
  • Simple two page two-page self-certification form online to complete
  • Loans should arrive within 24 hours of approval
  • No loan repayment in the first 12 months
  • First 12 months interest free
  • No set up charges – theses will be paid by the Government

Coronavirus Business Interruption Loan Scheme (CBILS)

Please note that you cannot apply if you are already claiming under the CBILS.

The government have, however, made a concession that if you obtained a CBILS loan you may convert £50,000 of that loan to a Bounce Back Loan.

CBILS Caution

Business owners should be wary of the CBIL’s scheme. Whilst the lender (i.e. bank) is provided with an 80% government guarantee – the directors will in effect be providing a 100% unsecured personal guarantee. Calling in the government 80% guarantee would only be triggered by an overall default by the directors to repay the loan.

This is one of the main reasons the banks are not keen to offer these loans as ultimately, enforcing their security will be a long and complex process. The other main reason is the inherent uncertainty as to the viability of many businesses during these exceptional times.

Key features of the CBIL scheme: