Small businesses set for boost with bounce-back loans

New 100% government backed loan scheme for small business, with loans between £2,000 and £50,000 available.

Small businesses will benefit from a new fast-track finance scheme providing loans with a 100% government-backed guarantee for lenders, the chancellor announced earlier this week (Monday 27 April).

Rishi Sunak said the new bounce-back loans scheme, which will provide loans of up to £50,000, would help bolster the existing package of support available to the smallest businesses affected by the coronavirus pandemic.

The scheme has been designed to ensure that small firms who need vital cash injections to keep operating can get finance in a matter of days.

The government, which has been consulting extensively with business representatives about the design of the new scheme, will provide lenders with a 100% guarantee for the loan and pay any fees and interest for the first 12 months. No repayments will be due during the first 12 months.

Ministers claim that the loans, anywhere between £2,000 and £50,000, will be easy to apply for through a short, standardised online application. The loan should reach businesses within days - providing immediate support to those that need it as easily as possible.

Rishi Sunak, chancellor of the exchequer, 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.”

Ed Miliband, Labour’s shadow business secretary, responding to the chancellor’s announcement, said: “Labour has been making the case for some weeks that the chancellor should underwrite 100% of loans for SMEs. It is welcome that he has seen reason and now agreed to 100% underwriting for the smallest loans.

“There remain very serious issues about the working of CBILS for SMEs seeking more than £50,000 support. They will be asking why they cannot have quick turnaround loans to get them through the crisis and whether CBILS will remain as slow and cumbersome as it has so far been.

“There are also massive challenges facing businesses for whom debt is not the answer. These issues will only become more pressing.”

The scheme will launch for applications on Monday 4 May. Firms will be able to access these loans through a network of accredited lenders.

The government will work with lenders to ensure loans delivered through this scheme are advanced as quickly as possible and agree a low standardised level of interest for the remaining period of the loan.

Dame Carolyn Fairbairn, CBI director-general, said: “The chancellor’s new 100% guaranteed loan scheme for small businesses is transformational. Sole traders, micro-firms and entrepreneurs will now have a simple route to fast finance to stay afloat, without red tape or time-consuming checks.

“Thousands of businesses could be saved by this lifeline. Banks now need to continue their work in overdrive to get the loans flowing faster. It’s good to see the chancellor listening to business, proving that where there’s a need to adjust schemes, he will do what it takes. It will be vital to maintain this approach in the months to come. Every job saved today will ensure a faster recovery tomorrow.”

Adam Marshall, BCC director general, said: “The chancellor has demonstrated he is listening to the concerns of our business communities and taking steps to get cash to the front line where it is needed. This new route for our smallest companies to apply quickly and get a fast decision will be crucial to those who have struggled to get a CBILS loan.”

At the other end of the business scale, this latest news comes just a week after the chancellor expanded the Coronavirus Large Business Interruption Scheme to firms with annual turnovers over £500m.

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