On 27 April 2020 the Chancellor announced yet another scheme to assist smaller businesses who are having difficulty accessing measures currently in place.
The Coronavirus Bounce Back Loan (CBBL) is to be made available from 4th May 2020 but details of the application process have not yet been revealed.
Loans of between £2,000 and £50,000 will be available to small and medium sized businesses for a terms up to six years, although in the initial announcement the terms “small” and “medium” are not defined. Unlike the Coronavirus Business Interruption Loan Scheme (CVBILS), a CBBL will be 100% guaranteed by the government rectifying a perceived defect in the CVBILS which made businesses reluctant to apply and lenders reluctant to lend.
Under a CBBL, no fees will be charged, no repayments need be made for a period of 12 months and during this time no interest will be charged.
The chancellor announced that funds would be in the applicant’s bank accounts within 24 hours of their application being submitted. This seems optimistic for several reasons.
The criteria the applicant needs to meet are that they must be UK based, have been negatively impacted by coronavirus and “not an undertaking in difficulty as at 31 December 2019”. The last of these criteria is no doubt going to involve an element of due diligence on the part of the lender involving at least the submission and scrutiny of management accounts as at that date. The loans will also be provided by a network of accredited lenders and it is reasonable to assume that these will be the same lenders approved to provide the CVBILS loans. Reasons given for delay in processing CVBILS applications include volume of applications and shortage of bank staff and it therefore seems likely that CBBL applications may encounter the same delays.
Any business which has already applied for and received a CVBILS loan is ineligible to apply for a CBBL but a business which has received a CVBILS loan can apply to transfer it to a CBBL up until 4 November 2020. Presumably, any guarantee given in respect of the 20% balance of a CVBILS loan would in these circumstances fall away but business should be vigilant and take professional advice if this is not offered by the lender.
The government is clearly alive to the array of challenges facing business during the Covid-19 pandemic and is working to plug the holes in its support measures as and when they arise. We can therefore expect further announcements to be made in the coming weeks, especially as a number of the existing measures are due to expire on 1 June 2020.
