Chancellor Rishi Sunak has this week bowed to pressure from business groups and launched a further loan scheme to help small businesses through the Coronavirus crisis.
The new Bounce Back Loans scheme is designed to help many small and micro businesses that appeared to have fallen through the cracks and were ineligible for most of the support measures that had previously been announced.
The new scheme will allow small businesses to borrow between £2,000 and £50,000 and access the cash, in most cases, within 24 hours of approval. The loans will have a 100% government guarantee and businesses can apply for a loan of up to 25% of their turnover. The government will also pay the interest on these loans for the first 12 months and no repayments will be due during this time.
The new scheme will open for applications at 9am next Monday, May 4, and firms will be able to access these loans through a network of accredited lenders.
The Chancellor said banks would not need to perform any forward-looking test of business viability or other complex eligibility criteria and that businesses will be able to apply for a loan online using a short and simple form.
Putting a £200,000 limit on turnover ensures that Bounce Back Loans cover most of the UK’s 5.6 million micro-businesses with up to nine employees, which turned over £900bn in 2019 or an average £160,000 each, according to the Treasury. However, small businesses can only apply for a Bounce Back Loan if your business was not an “undertaking in difficulty” as of December 31, 2019.
The new loans provide high street banks with a guarantee that the state will refund the bank for the entire value of the loan if a borrower is unable to repay, up from 80% on the government’s existing coronavirus business interruption loan (CBILs).
The Chancellor had faced calls for the Coronavirus Business Interruption Loan Scheme (CBILS) to have a 100% government guarantees rather than 80%, but he had resisted doing so, saying he remained unconvinced that it was necessary to make such a move. However, many businesses are reporting difficulties accessing finance as banks are refusing to lend.
The Chancellor said: “Our smallest businesses are the backbone of our economy and play a vital role in their communities. This new rapid loan scheme will help ensure they get the finance they need quickly to help survive this crisis. This is in addition to business grants, tax deferrals, and the job retention scheme, which are already helping to support hundreds of thousands of small businesses.”
For details of how to apply for the Bounce-Back Loans, follow this link: