The Bounce Back Loan Scheme was extremely popular, but unfortunately, the facility and its top up option ended on 31 March 2021. While the government has subsequently launched the Recovery Loan Scheme, which is open until 31 December, this is a different offering and is set at less competitive rates.

What was the Bounce Back Loan Scheme?

The scheme was aimed at the smallest businesses that were affected by the Covid-19 pandemic. Coffee shops, hairdressers and florists were just some of those who took out Bounce Back Loans, following the scheme’s launch on 4 May 2020. For the lender, the government provided a 100% guarantee – and they were offered interest free for the first year, before repayments began with the interest rate set at 2.5%. Loans were set for a period of six years. 

Who Provided the Bounce Back Loan Scheme?

Loans were provided by the British Business Bank, through a range of accredited lenders, including the big high street banks and numerous smaller specialists. Loans were simple to apply for online, with only seven questions asked. If successful, the money came though in a few days.

Although lenders benefited from the government safety net, the borrower remained 100% liable for the debt. More than 1.5 million Bounce Back Loans worth £47 billion were taken up during the pandemic.

What was the Top Up Facility for the Bounce Back Loan Scheme?

The Top Up was a way that borrowers could increase their existing loan. It was possible to increase the amount of the loan by 25% of the annual turnover declared when the original loan was applied for, or £50,000, whichever value was lower.

The Top Up facility did not constitute a new loan, it just meant increasing the size of the original Bounce Back Loan.

The same interest rate of 2.5% applied to the extra amount borrowed and the government covered the interest on the Top Up until the interest free period ran out on the original loan.

Because the Top Up increased the total amount of borrowing, then so too did the overall cost of the loan. Adding a Top Up did not change the date when repayments started, this remained the same date as for the original loan, but for the now larger amount.

What if I Can’t Repay my Bounce Back Loan?

Some borrowers may now be due to start their repayments, but could also have cashflow problems. The government has introduced the Pay as You Grow scheme, which can allow businesses longer to repay their Bounce Back Loans. This provides the option to pause repayments for up to six months and to extend repayment periods from six to 10 years. 

Is There a Replacement for The Bounce Back Loan Scheme?

The Recovery Loan Scheme was launched on 6 April 2021 and runs until 31 December 2021. The scheme has a government-backed 80% f guarantee to lenders and offers term loans, overdrafts, and invoice and asset finance. The maximum loan size is £10 million and the minimum is £25,000 for term loans and overdrafts, and £1,000 for invoice and asset finance.

A benefit for borrowers is that personal guarantees are now permitted for amounts borrowed of up to £250,000 and a principal private residence cannot be taken as security.

Meanwhile, a key difference with the Recovery Loan Schemes is that borrowers are required to meet the cost of interest payments and any fees from the outset. The rate of interest, to include fees, is capped at 14.99% and so it is considerably less generous.

The Covid-19 pandemic saw a range of support measures introduced to help businesses and employees and Bounce Back Loans with their Top Up option were widely welcomed by many small firms. There is no doubt that some would also like to see the scheme reopened, but current plans are for lower levels of support, and the furlough scheme that supports employees will also end in September. It is hoped that lockdowns will not be reintroduced and businesses will have the necessary resilience to survive into the future.