What Is the Business Bounce Back Loan Scheme?

BBLS and its impact in helping UK businesses.

Updated: September 9, 2023

It goes without saying that the start of the decade was a pretty tumultuous time for us all, but the impact that the COVID-19 pandemic had on businesses was also devastating as many companies, both big and small, began crumbling over their lack of income.

While the UK government's response and handling of the pandemic was controversial at best, one initiation that they undisputedly got right was their Business Bounce Back Loan Scheme (BBLS) — a scheme that supported businesses during some of the trying times that were brought about during the peak of the outbreak.

Still, while the scheme closed its doors to any new applications over two years ago now, it's worth taking a look at the significance of this loan, even if it is through a retrospective lens.

So, throughout this article, we'll be taking a look at the BBLS and its impact in helping UK businesses weather the economic storm during the pandemic.

Aside from this, though, we'll also be covering a few alternative government loans that are worth exploring, given how you can no longer apply for this one.

An Overview of the Business Bounce Back Loan Scheme

As touched on, the Business Bounce Back Loan Scheme, which is commonly referred to as the BBLS, was quite the outlet for any businesses that were struggling to stay afloat during the coronavirus outbreak.

At its core, the purpose of this scheme was to provide a financial safety net for UK businesses of all sizes, ultimately ensuring that the economy wouldn't completely collapse and that they had the resources needed to make it out of the economic uncertainty that came with the virus and lockdowns.

There were quite a few financial gaps created from these lockdowns, whether it was a lack of customers or the inability to trade/receive essential resources to keep the business profitable. Many businesses were simply haemorrhaging money during this period, so the Business Bounce Back Loan Scheme acted as a kind of bridge for this gap.

When put into practice, these loans were meant to cover a fairly wide range of expenses that come with running a business — whether that's certain operational costs, ensuring payrolls can be sustained, or even generally just safeguarding jobs.

Eligibility Criteria

In this next section, we'll be covering what the eligibility criteria that businesses had to meet in order to qualify for BBLS support was, but it's worth reiterating again — the scheme's final chapter unfortunately closed on March 31, 2021, so you can't receive them anymore.

With that in mind, let's delve into some of the, albeit fairly lenient, requirements:

Size and Type

Generally speaking, the Business Bounce Back Loan Scheme adopted a relatively inclusive approach, given how many different business sizes and sectors were affected by the virus.

Whether you were a solo entrepreneur, freelancer, or even a larger corporation, you could receive a loan agreement to help you get back on your feet. So, because this business lending scheme was so flexible, many different kinds of businesses, regardless of their particular structure or scale, were able to access a much-needed financial lifeline.

It is, however, worth noting that certain businesses and financial entities were actually exempt from applying for this loan.

For instance, certain reinsurers/insurers (not insurance brokers, though) and banks (for example, the British Business Bank PLC, which is a development bank wholly owned by His Majesty's Government) wouldn't be able to apply for this loan scheme.

Still, for your average high street business or freelancer, you wouldn't have any problem applying for a business interruption payment from the government.

Location

Naturally, one of the only fundamental requirements for being eligible to apply for BBLS was that you were a business that was based in the UK.

Understandably so, the UK government was focused primarily on stimulating its own economy during the pandemic, so that's why there was a geographical limitation within the country's borders of who could apply for the loan.

How Businesses Would Apply for This Loan

As touched on earlier, anyone who was trying to secure a Business Bounce Back Loan generally had a quite straightforward process doing so. Obviously, the pandemic came with relatively urgent economic challenges, so the loan being delivered with speed and ease was always a top priority.

Let's take a look at how businesses would navigate through the application process:

1. Contacting Accredited Lenders

First things first, they would have to approach one of the many accredited lenders that were participating in the scheme.

There was actually a fairly broad range of options when it came to these lenders, whether they were major high street banks or alternative finance providers, so any business owners could make a decision that best suited some of their needs and financial preferences.

2. Completing the Application

After the business owner has chosen a lender, the next step would naturally be to complete the loan application.

As mentioned, the government wasn't trying to make this a complicated process for anyone that way applying, so the application form itself would typically just require basic information about the business — whether that's the business name, registration details, or financial figures.

Furthermore, the Business Bounce Back Loan Scheme was actually an unsecured type of loan, meaning that you didn't need to provide some form of collateral in order to obtain it.

Having said that, you'd still have to provide accurate information during your application to ensure that you're still eligible to receive it.

3. Minimal Documentation

Again, one of the main hallmarks of BBLS was the fact that it had a very streamlined application process.

As most business owners have probably experienced when applying for loans in the past, you're often bogged down with rather extensive documentation and paperwork to fill out in order to apply — not to mention getting your credit rating checked and possibly even having to fork over some kind of collateral (if it was a secured loan).

The Business Bounce Back Loan Scheme, on the other hand, generally aimed for a much more simplified process, looking to approve and send you the funds as soon as possible so your business could access support swiftly.

4. Rapid Approval and Disbursement

Following on from this last point, speed was the name of the game when it came to BBLS, as the lack of income was seriously having an impact on the financial stability of some of these businesses, both big and small.

Lenders were often instructed by the government to process these applications as fast as they could, usually within a matter of days, even.

So, aside from just how to apply for this kind of loan scheme, how much money were businesses actually receiving from them?

Loan Amounts

Under the Business Bounce Back Loan Scheme, businesses were usually able to access loans that ranged from £2,000 up to a maximum of £50,000. Obviously, there's quite a big disparity in these amounts, but this range was generally just so it could accommodate businesses of various sizes and financial needs.

So, whether a small local corner shop required a more modest boost to keep the lights on and pay their staff or a larger enterprise needed substantial support, BBLS were a versatile solution.

Maximum Loan Limit

As mentioned, regardless of how big or successful your business was, the maximum loan limit you could receive was capped at £50,000.

This wasn't because the loan scheme was being underfunded, either, it was generally just so that businesses were able to access significant financial assistance but weren't being overburdened with excessive debt once the dust had settled.

Generally speaking, this cap was more of a reflection of the government's commitment to striking a balance between support and financial responsibility, as it's unrealistic to supply a small business with hundreds of thousands of pounds and expect them to pay it back (which is also why the amount you were able to receive was approximately 25% of your total annual turnover).

Options for Paying Back Your BBLS Loan

While the Business Bounce Back Loan Scheme obviously provided useful financial support to businesses when it was needed most, it's still important to remember that they were loans — and like all loans, they naturally need to be paid back at some point.

Fortunately, businesses had quite a few different options when it came to repaying their BBLS loans:

1. Repayment Holiday

Initially, once you actually received your loan, you'd be able to enjoy a 12-month repayment holiday, which basically means that businesses didn't have to make any repayments during this period.

Of course, this type of grace period was very much welcomed by anyone who received it, as it allowed businesses to find their feet again and begin generating revenue before having to worry about making loan repayments.

2. Flexible Repayment Terms

This kind of repayment holiday wouldn't last forever, though, as businesses were required to start repaying the loan over a fixed period, which we'll come onto in a bit more detail during the next section. The main takeaway from this was they were flexible, usually having a term of around six years.

Having said that, there was still some wiggle room through the “Pay as You Grow” options that were introduced by the government.

3. Pay as You Grow

In essence, “Pay as You Grow” was a feature that the government designed in order to ease some of the burden involved when making loan repayments.

While you were initially granted a term of six years to pay off the loan, businesses that opted for this option could choose to extend the loan term to 10 years instead (paying the same interest rate that was fixed at 2.5%), ultimately reducing their monthly repayments.

What's more, they would also have the option to solely make interest payments for a specified period or even take a repayment holiday if it was needed, all without impacting their credit rating.

As far as loan repayment terms go, this is clearly quite a generous circumstance, but that reflects the purpose of why the Business Bounce Back Loan Scheme was invented in the first place — to get your business up and running again and stabilise the UK economy.

4. Early Repayment

If you ended up landing on your feet after receiving this loan and were in a relatively strong financial position (or at least stronger than you were before coronavirus lockdowns started to impact your business), you could actually opt to repay the loan early without incurring any early repayment charges that you might typically find with a loan.

Obviously, most loans, whether they're personal or business related, tend to apply early repayment charges so that you end up paying more in interest, but the aim of this loan wasn't profit orientated; it was to prevent your business from collapsing.

So, these loan repayment terms would generally provide a degree of financial flexibility for any businesses that might've recovered more quickly than anticipated.

Risks and Considerations

We've talked a lot already about how helpful the Business Bounce Back Loan Scheme was in helping businesses stay afloat during pretty challenging times, but the reality is that they weren't entirely perfect or risk free, either.

So, let's take a closer look at what some of the potential issues were that business owners had to consider before taking advantage of this support initiative — because, after all, they were loans, and no loan is completely safe or risk-free.

1. Responsibility for Repayment

Whenever a business was going to apply for a BBLS loan, they would be entering into a financial commitment that, like all other kinds of loans, required careful management in order to not end up in hot water.

Remember, the Business Bounce Back Loan Scheme was not a grant or even a gift; it was a loan from the government that naturally came with the responsibility of paying it back. As such, any business owners who received one had to be well-prepared in order to meet some of these repayment obligations so that they were still in accordance with the agreed-upon terms.

Covid-19, as a whole, certainly did its job of reminding us of how important financial management is, and BBLS was definitely not an exception. And yes, while it's true that businesses have up to 10 years to repay the loan, there are still legal consequences if it can't be done.

2. Impact on Credit Ratings

Although your credit rating wasn't an important factor in terms of securing one of the BBLS loans, the risk of tarnishing your credit score was still there if you didn't pay the loan back or missed repayments.

When you were issued the loan, lenders would have the option to register Bounce Back Loans with credit reference agencies, essentially meaning that your creditworthiness could be affected based on how you managed the loan.

So, it was naturally imperative for businesses that got involved with the Business Bounce Back Loan Scheme to be aware that any mismanagement, failure, or general delay in repaying the loan could definitely have adverse consequences for their credit ratings.

Therefore, this consideration was pretty vital for any business to understand so that they wouldn't have to get involved with the financial ombudsman service.

3. Seeking Professional Advice

As applying for loans usually requires quite complex financial decisions, many businesses would often look for financial guidance to ensure they were making the right decision in taking a BBLS loan out.

Whether you were looking for free independent advice or you'd hire an accountant, you would always need to assess your risk profiles and general ability to pay the loan back before applying for the Business Bounce Back Loan Scheme.

Alternatives to BBLS

To wrap things up, it's worth mentioning that while the Business Bounce Back Loan Scheme is no longer available, any businesses out there that require some financial backing still have plenty of options to consider.

Let's walk through a couple of these now:

1. Traditional Bank Loans

Generally speaking, traditional bank loans have been one of the go-to methods of receiving finance for your business for a while. Whether you receive one through a well established bank or any other kind of financial institution, you're able to receive the money you need with relatively little hassle with one of these loans.

Still, unlike the BBLS, where you didn't need a particularly high credit score to receive the loan, you'll generally need to have a decent credit history and a track record of being financially responsible in order to receive a traditional bank loan.

Unfortunately, this does mean that securing one of these loans can be a bit of a hurdle for any newer businesses out there or those who've maybe had a few financial hiccups in the past.

Aside from the general requirements, though, these kinds of loans often provide a bit more breathing room when it comes to repayment terms, meaning you can manage your cash flow without feeling too squeezed or pressured.

If you're seriously considering applying for one of these bank loans, just be ready to offer up fairly comprehensive documentation when it comes to your finances — whether that's your business plans, financial statements, or possibly even collateral if they explicitly mention that it's a secured loan.

2. Business Lines of Credit

In essence, a business line of credit is more or less like having a credit card for your business, basically being a flexible source of funding that allows you to tap into a predefined credit limit whenever you might need it.

One of the best things about this kind of business funding is that you're only ever paying interest on the money you actually borrow, too, so it's just there if you need it.

From managing your everyday expenses, covering surprise costs, or even just smoothing out those ups and downs in your cash flow, these are a solid option for any businesses looking for extra financing options.

To get a business line of credit, though, you're usually going to need a solid credit history — similar to traditional bank loans. Furthermore, be prepared to put up some collateral or provide a personal guarantee, as certain lenders might require this, too.

Related Guides:

What Is the Business Bounce Back Loan Scheme: FAQs

Where Can I Find More Information About the BBLS?

Were There Any Additional Fees Associated With BBLS Loans?

What Happened to the BBLS After It Closed for Applications?

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