April 28, 2020 @ 13:09 by Richard Dawson
In his latest effort to shore up the private sector and support businesses through the coronavirus pandemic, Chancellor Rishi Sunak yesterday (April 27) announced the introduction of a 100 per cent Government-backed loan scheme.
Targeted specifically at SMEs, the Bounce Back Loan scheme will help small firms borrow between £2000 and £50,000.
As with the Coronavirus Business Interruption Loan Scheme (CBILS), there won’t be any fees or interest payable for the first 12 months.
Loan terms are up to 6 years, with no repayments due for the first 12 months. The Government has also said it will work with lenders to agree a low rate of interest for the remaining loan period.
Critically, it is thought that these smaller loans should arrive in bank accounts within 24 hours of approval.
This is because there will be no forward-looking tests of business viability and no complex eligibility criteria. It is just a quick, standard form for businesses to fill in.
The micro loan scheme aims to provide a quick solution for those who need to access cash now.
The announcements comes as many businesses have faced challenges accessing the CBILS.
The CBILS application process is more complicated and many lenders have asked for additional guarantees and detailed business planning information, delaying the approval process.
With many businesses wondering how they are going to meet their financial obligations today, time is certainly of the essence when it comes to these initiatives.
The Bounce Back Loan scheme should help the smallest firms get the cash they need and quickly.
Speaking in the House of Commons yesterday, Mr Sunak said: “I know that some small businesses are still struggling to access credit. They are, in many ways, the most exposed to the impact of the coronavirus.
“If we want to benefit from their dynamism and entrepreneurial spirit as we recover our economy, they will need extra support to get through the crisis.
“Today we are announcing a new micro loan scheme, providing a simple, quick and easy solution for those in need of smaller loans.
“Businesses will be able to apply for these new Bounce Back Loans for 25 per cent of their turnover, up to a maximum of £50,000, with the Government paying the interest for the first twelve months.
“I have been in close talks with the banks and I’m pleased to say these loans will be available from 9am next Monday (May 4).”