Coronavirus: The Bounce Back Loan and Future Fund

In a further effort to bolster British businesses during the pandemic, the government is introducing new measures in the form of loans over the coming weeks that will come as good news for businesses in these difficult times.

Coronavirus Bounce Back Loan

Announced by the Chancellor in Parliament on Monday, this loan scheme is to be made available from the 4th of May 2020 via accredited lenders. The aim of the Bounce Back Loan is to provide credit to the large number of SMEs who were unable to secure funding via the Coronavirus Business Interruption Loan Scheme (CBILS) that was launched in April. Whilst the amounts available via this loan are much smaller – anywhere from £2,000 to £50,000 may be borrowed – the government has confirmed that it will guarantee 100% of the loan with no interest, fees nor repayments due for the first 12 months. Applications will be made via a short online form with the cash supposedly available within several days of the application being approved. This will be a relief for the businesses that were either rejected from the CBILS or were unable to consider accruing further debt even with 80% government backing. To be eligible there are currently three criteria a business must meet:

  • Based in the UK
  • Negatively affected by COVID-19
  • Was not an ‘undertaking in difficulty’ at 31st of December 2019

There are notable some exceptions here; banks, insurers, public sector bodies and some educational establishments are not able to apply, nor are businesses that have already claimed a loan under the CBILS. Beyond this however, the loan is available to businesses of all types and the government is hoping it will provide a lifeline to those that are struggling with the measures currently in force. If your business has already received a loan of up to £50,000 under CBILS, then it is possible to transfer your loan to the new scheme and receive the same improved backing terms. This must be arranged by the 4th of November 2020 with your lender. See here for further information.

Coronavirus Future Fund

In a slightly different approach to funding during COVID-19, the Coronavirus Future Fund aims to help businesses raise capital by encouraging investment from private entities. The government will provide loans for amounts anywhere between £125,000 and £5,000,000 to companies that are able to match the loan amount with a private investment. They will be available based on the following:

  • The business is based in the UK
  • It can attract the equivalent match funding from third party private investors
  • It has previously raised at least £250,000 in equity investment from third parties within the last 5 years

The loan will mature after 36 months, and the use of the funds will be restricted to working capital purposes as per the basic terms that the government has already established.

No information has yet been released on how companies can apply, except that the loan will be provided via the British Business Bank. It is likely that considerable proof be will be required in order to attain this funding, however we are still waiting on to find out the exact details. This is a positive step for newer companies that have so far relied on equity investment to fund their operations and have not yet reached a point of profitability, and we are hoping that some more information will become available within the next few weeks.