Everything you need to know about BBL’s

7th September 2020

Launched by Chancellor Rishi Sunak back on the 4th May, Bounce Back Loans (BBL) are aimed at smaller businesses who are struggling financially due to COVID-19.

These loans are much more favourable than standard commercial or personal loans as they’re 100% government-backed and much easier to obtain. The scheme is currently set to run until the 4th November 2020.

Here we’ve put together a quick go-to guide on what you need to know.

Key features of the scheme

• UK businesses can claim a loan for up to 25% of their turnover
• The scheme supports lenders with a 100% government-backed guarantee against the amount borrowed (both capital plus interest)
• The borrower must self-declare they meet the eligibility criteria and make certain confirmations
• Loans can be anything from £2,000 to £50,000 depending on the business
• Loans can be paid back over a maximum of six years and businesses can repay early if they wish
• No interest or repayments are made in the first 12 months
• After that, repayments are made at 2.5% interest per annum
• The borrower is liable for 100% of the debt throughout the period of the loan
• There are no personal guarantees. This means that no recovery action can be taken in respect of the borrower’s main residence or primary personal vehicle. However, other personal assets may be at risk if the business is a sole trader or a partnership.

Who can claim?

A businesses must be able to declare that it has been negatively affected by the coronavirus pandemic. It also needs to be clear that it was not in any financial difficulty prior to 31st December 2019. Also, the business:

• Must have been trading, or engaged in commercial activity, by 1st March 2020
• Must derive at least 50% of its income from its trading activity
• Must not be subject to bankruptcy or liquidation, or undertaking debt restructuring, when the BBL application is/was made
• Must not have availed of the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) or the Covid Corporate Financing Facility Scheme (CCFF) which is offered by the Bank of England. However, a business may still receive a BBL if the purpose of the loan is for refinancing a previous CBILS, CLBILS or CCFF amount
• Must not operate in a restricted sector (typically banking or finance)

Note that lenders may apply their own individual tests and rules.

How do businesses apply for the Bounce Back Loan?

Businesses must apply to one of the scheme’s accredited lenders. This will be the bank they have their business account with.

Applying is a fairly simple form-filling exercise mostly concerned with the borrower’s turnover, tax details, banking information and a self-declaration about how COVID-19 has impacted their business. No security or personal guarantees need to be provided and successful applicants will receive the funds within a few days.

If I receive a Bounce Back Loan, will any R&D Tax Credit claim be affected?

Yes – highly likely.

Just briefly, R&D Tax Credits are a tax break offered by the UK government to encourage business growth and innovation. They allow organisations to reclaims up to 33% of their research and development (R&D) costs, even if the project was ultimately unsuccessful. Exactly how much a business can claim depends largely on its size, turnover and whether it has previously received state aid.

The money is paid either as a proportional Corporation Tax refund or as a cash lump sum for companies that made a loss. It’s tax-free and can be used for anything, such as buying materials or equipment, paying off debts, paying dividends or hiring more staff.

The key is to have undertaken a project that sought to make an advance in science or technology (however small). This may be by designing a brand new product, process or service for instance, or by upgrading an existing one.

The costs that can be covered by an R&D Tax Credits claim are also many and varied, and include staff wages and employer NIC/pension contributions, payments made to subcontractors, certain materials, software and overheads and much more.