The Chancellor has announced a new loans scheme to help small businesses access cash fast during the COVID-19 pandemic.
The Chancellor has announced a new fast-track loans scheme for small businesses struggling due to the COVID-19 pandemic.
Rishi Sunak said the new Bounce Back Loans scheme, which will provide loans of up to £50,000, said 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 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.
The government says the loans will be easy to apply for through a short, standardised online application and that the loan should reach businesses within days.
Sunak 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.”
The scheme will launch for applications on Monday 4 May and firms will be able to access these loans through a network of accredited lenders. The government says it will agree a low standardised level of interest for the remaining period of the loan.
Mike Cherry, National Chairman of the Federation of Small Businesses said the scheme would give hope to thousands of micro businesses.
He said: “The headline terms will be hugely welcomed by the sole traders and micro businesses that make-up 95% of the small businesses community. Removing the need to provide forecasts marks an important step forward – small firms cannot be expected to predict the future in this climate.”
He called for assurances that it would be up and running by next week with money delivered 24 hours after a successful application and said all those who have been declined a small coronavirus business interruption loan scheme (CBILS) facility should now be written to with the offer to re-apply via this new system. He added that those mid-way through a standard CBILS application should also be given the option to change tack.
He stated: “Many small businesses have had to pay March and April’s payroll, on top of other overheads, with no revenue coming in at all. The CBILS initiative was their only lifeline until job retention scheme payments kicked in. It has so far proved to be extremely difficult to access for the vast majority. Today’s announcement promises to change that fundamental lack of access to working capital.”