Further to our blog discussing the key points and aims of the Bounce Back Loan Scheme (‘BBLS’) earlier this year, on 10 November 2020 the government announced that participating lenders are able to offer ‘top-ups’ to smaller business’ existing bounce back loans, provided that they originally borrowed less than the maximum available.
Summary of the Bounce Back Loan Scheme
The government backed scheme allows smaller businesses gain access to a six-year-term loan from accredited lenders of between £2,000 up to 25% of business turnover to a maximum of £50,000. Businesses are not required to make any repayment within the first 12 months by way of a capital repayment holiday, during which period the government will pay interest and loan-related costs. Thereafter, the government will agree a low standardised level of interest which will then be applied to the remaining loan term. The government guarantees 100% of each loan, and early redemption is permitted without early repayment fees.
The BBLS scheme runs alongside the Coronavirus Business Interruption Loan Scheme (CBILS). The deadlines for applications for government-backed loan schemes have been further extended until 31 January 2021. For further information on how to apply for a BBLS loan, please see our blog: Bounce back loans for smaller businesses.
For whom are top-ups available?
A top-up is available to smaller businesses which already possess an existing bounce back loan, provided that they originally borrowed less than the maximum amount available to them. Top-ups are only available from the borrower’s existing BBLS lender.
How much can be topped-up?
A top-up is calculated by taking the lesser of £50,000 or 25% of the annual turnover certified in the original BBLS application form, minus the original loan value. The minimum top-up amount is £1,000.
For example, a borrower certified an annual turnover of £100,000 on the original bounce back loan application. At the time, it took a loan of £15,000 (15% annual turnover). It can now apply for a further £10,000 (10% annual turnover) bringing the loan to the maximum 25% of the originally certified annual turnover.
Any top-up taken will not change the capital repayment holiday period, which runs for 12 months from the initial drawdown date on the original bounce back loan.
For example, the initial drawdown date of the original loan was 1 July 2020 and the drawdown date of the top-up was 15 November 2020, the capital repayment holiday will run to 30 June 2021.
How to apply for a top-up?
Borrowers will need to obtain and complete an application form from their existing BBLS accredited lender.
This application form will require borrowers to indicate the amount of top-up requested and to again provide certain declarations set out on the original application form.
For details of the other government backed loan schemes available and for general business related Coronavirus updates why not sign up to receive email notifications from us as and when new guidance is received from the government or other regulatory bodies by visiting our Coronavirus (COVID-19) – Legal advice and guidance page.
If you would like to discuss any of the loan schemes, or have any other funding enquiries, please contact a member of the Banking and Finance team and we will be delighted to assist you.
This update was co-authored by Lucy Andrews, Trainee Solicitor and James McNeil, Partner.