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Published 10 June 2022

How to apply for a Small Business Coronavirus Bounce Back Loan

The Bounce Back Loan Scheme was set up by the government to help businesses get financial support during the Covid-19 pandemic. It’s now closed, but you can find out more information about how to repay these loans through Pay As You Grow (PAYG).

To support small businesses during the coronavirus pandemic, Chancellor Rishi Sunak announced a new scheme called the Bounce Back Loan Scheme (BBLS).

This scheme closed for applications on 31 March 2021. However, if your business needs funding, there are many other sources of finance available.

Businesses who have taken out a Bounce Back Loan can tailor repayments if they are finding it difficult to repay their loans. Under the Pay as You Grow (PAYG) scheme, borrowers can choose to extend their loans, make interest-only payments or pause repayments for up to six months.

In this guide we look at what the Bounce Back Loan Scheme was, and how you can tailor repayments through the different Pay As You Go options. We also look at some other forms of business finance that may be suitable for your business requirements.

What was the Bounce Back Loan Scheme?

The Bounce Back Loan Scheme was a government scheme to help small businesses through the coronavirus pandemic. Businesses could apply for loans from £2,000 up to 25% of their turnover, with a maximum loan of £50,000.

Loans were available with terms of up to 6 years, although it is possible to extend it to 10 years under the Pay as You Grow scheme (see below).

Businesses didn’t need to make any repayments during the first 12 months of the loan, or pay any interest or fees. After 12 months, the interest rate on these loans is set at 2.5% a year.

Bounce Back Loans are 100% guaranteed by the government and opened for applications on 4 May 2020. It closed for applications on 31 March 2021.

What does 100% government guaranteed mean?

The 100% government guarantee means that banks will not have to absorb losses on loans taken out by companies that may not be able to repay all of the debt. If a business cannot repay, and the funds cannot be recouped through normal means, the state will take a loss instead.

Bounce Back loan repayments

Businesses are due to start repaying their Bounce Back Loans 12 months after they receive the loan. A fixed interest rate of 2.5% per year will apply to the loan.

You can repay a Bounce Back Loan in monthly instalments for the agreed term, just like any other loan.

However, the Bounce Back Loan Scheme gives businesses some more flexibility with their repayments through Pay As You Grow (PAYG). This can give businesses some extra breathing space if they are struggling to pay back their Bounce Back Loan.

The Pay as You Grow repayment options are:

  • Extend the loan from six to 10 years (at the same interest rate). This would reduce your monthly payments but you would pay more interest overall.
  • Make interest-only payments for six months, with the option to do this three times in total during the lifetime of the loan. This will reduce your monthly payments but you will have to pay more in interest over the course of the loan.
  • Take a payment holiday for six months, available from the time the first payment is due. This can be used once and you will pay more interest in total.

Businesses can use these options individually or combine them with each other.

Who was eligible for the Bounce Back Loan Scheme?

You could apply for a loan if your business met the following criteria:

  • based in the UK
  • was negatively affected by coronavirus
  • was not already in financial difficulties on 31 Dec 2019

The following were not eligible:

  • banks, insurers and reinsurers (but not insurance brokers)
  • public-sector bodies
  • further-education establishments, if they are grant-funded
  • state-funded primary and secondary schools

What other funding can I apply for?

Until 30 June 2022, businesses can apply for a recovery loan. This was another scheme set up by the government to help businesses struggling financially during the coronavirus pandemic and its aftermath.

Businesses in need of funding can also look at other sources of business finance.

For example, many national and local organisations provide business grants that don’t need to be repaid. See our list of the top small business grants in the UK.

There are also many different types of business loans that can help businesses pay for equipment and machinery, cover any temporary cash flow problems, invest in growth, and more.

You can find business loans from traditional high-street banks as well as online lenders, so it’s worth comparing your options to see what loans best meet your requirements and what deals you qualify for.

Some of the main types of business loans include:

  • Secured business loans:If your business owns a property or any valuable assets, these could be used as security for a loan. However, secured loans come with the risk that the lender could repossess your asset if you don’t make your repayments.
  • Invoice financing:If your business has cash tied up in unpaid invoices, you can take out a loan to access a percentage of the value of the invoice, for a fee.
  • Merchant cash advance:With these types of loans, you can borrow a lump sum of money and then repay it through card transactions. Each time your business receives a card payment, a percentage is automatically deducted to go towards repaying the loan.
  • Lines of credit:With this option, businesses will receive a credit limit. They can borrow as much or as little as they want, up to this limit, and only pay interest on the amount they borrow.

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About the Authors

Nic Redfern

Nic Redfern is Finance Director at NerdWallet and an accomplished business and finance strategist with over 26 years' experience. Nic has been instrumental in the growth of several regional and…

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Rhiannon Philps

Rhiannon has been writing about personal finance for over three years, specialising in energy, motoring, credit cards and lending. After graduating from the University of Cambridge with a degree in…

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