The smallest businesses, which Companies House refers to as ‘micro businesses’, were struggling to get funding through HM Treasury’s Coronavirus Business Interruption Loan Scheme (CBILS) launched in March 2020. HM Treasury, the Department for Business, Energy & Industrial Strategy (the Department) and the British Business Bank (the Bank), based on a limited evidence of the underlying challenges for businesses, developed the Bounce Back Loan Scheme (the Scheme). The Scheme sought to provide businesses with loans of up to £50,000, or a maximum of 25% of annual turnover, to maintain their financial health during the covid-19 pandemic.
The loans are delivered through commercial lenders such as banks and building societies. The Scheme expects lenders to approve and pay out the loans within 24 to 48 hours of application. To make the process as fast as possible the Scheme does not require lenders to check the information on the loan application form or to perform credit and affordability checks. Borrowers are expected to repay the loans in full but owing to the absence of these checks Government provides lenders a 100% guarantee on the loans: if the borrower does not repay the loan, Government will. The loans have a fixed interest rate of 2.5% and a maximum length of ten years; in the first year of the loan there are no capital repayments due, and Government pays the interest—making it interest-free for the borrower. As of 15 November, the Scheme had provided over 1.4 million loans to businesses, totalling £42.2 billion. The Scheme will now run until 31 January 2021.