Low interest rate for Bounce Back Loans
The Bounce Back Loans scheme first announced by the Chancellor, Rishi Sunak, in late April was launched on 4 May 2020. The new scheme allows small businesses to borrow between £2,000 and £50,000 and access the cash in most cases within 24 hours of approval.
The loans come with a 100% government guarantee and businesses can apply for a loan of up to 25% of their turnover. The government will also pay the interest on these loans for the first 12 months and no repayments will be due during this time. Just prior to the launch of the scheme, the Chancellor confirmed in a letter to accredited lenders that an affordable flat rate of 2.5% interest will be charged on these loans.
The scheme is available through a range of British Business Bank accredited lenders including the five largest banks. Banks will not perform any forward-looking test of business viability or other complex eligibility criteria for these loans. Businesses can instead apply for a loan online using a short and simple online form, with only seven questions.
Eligible companies will be subject to standard customer fraud, anti-money laundering (AML) and Know Your Customer (KYC) checks prior to any loan being made. Some State Aid restrictions may apply to applications. Any business that has already taken out a Coronavirus Business Interruption Loan of £50,000 or less can apply to have these switched over to the Bounce Back Loans scheme.