Chancellor Rishi Sunak has announced a new “quick and easy” loan scheme for coronavirus-hit small businesses to borrow up to £50,000 – and says the Government will guarantee 100% of the cash.
The Chancellor has unveiled a series of measures to support businesses in recent weeks but the schemes have been criticised for being too slow and complex, or unsuitable for small firms.
Now Mr Sunak has announced the launch of Bounce Back loans, which he says will be easier for small firms to access and could mean applicants getting their money within 24 hours.
On Twitter, Mr Sunak said: “Today, we’re announcing a new loan scheme. A simple, quick, easy solution for those in need of smaller loans.
“Businesses can apply for new Bounce Back Loans up to a maximum of £50,000, or 25% of turnover, with the government paying the interest for the first 12 months.
“We’ve been in close talks with the banks in recent days and these loans will be available from 9am next Monday.
“There will be no forward-looking tests of business viability; no complex eligibility criteria; just a simple, quick, standard form for businesses to fill in.
“For most firms, loans should arrive within 24 hours of approval.
“And I have decided, for this specific scheme, that the Government will support lending by guaranteeing 100% of the loan.”
Mr Sunak said the Bounce Back scheme was being 100% backed by the Government, unlike larger schemes. Last week Mr Sunak had said he was not yet persuaded of the need for 100% Government-backed loans.
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Today he said: “We shouldn’t ask taxpayers to bear all the risk of lending almost unlimited sums to businesses who may have very little prospect of paying those loans back – and not necessarily because of coronavirus.
“So I don’t think it’s right to provide 100% guarantees on all our schemes
“Instead, the new Bounce Back Loans carefully target that extraordinary level of state support at those who need it most.
“And the £50,000 cap balances the risk to the taxpayer with the need to support our smallest businesses.”
Earlier, Mr Sunak told MPs: “I know that some small businesses are still struggling to access credit.
“They are in many ways the most exposed businesses to the impact of the coronavirus and often find it harder to access credit in the first place.
“If we want to benefit from their dynamism and entrepreneurial spirit as we recover our economy, they will need extra support to get through this crisis.”
Federation of Small Businesses chairman Mike Cherry said: “To date, the existing interruption loan scheme has not been working for the small firms that make-up 99% of our business community.
“The decision by the Chancellor to listen to our recommendation for a 100% guarantee on smaller loans, alongside the creation of a new fast-track system for those applying for them, will give hope to thousands.
“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.
“From here, we need the right delivery. The new fast-track system must be established by next Monday with money delivered 24 hours after a successful application as promised.
“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. Those mid-way through a standard CBILS application should also be given the option to change tack.”
And CBI director-general Dame Carolyn Fairbairn said the loans could be “transformational”, adding: “Small firms & entrepreneurs will now have a simple route to fast finance to stay afloat. Banks now need to continue their work to get the loans flowing as fast as possible”.
British Chambers of Commerce director general Adam Marshall 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.”
Roger Marsh, Chair of the Leeds City Region Enterprise Partnership and the NP11 network of 11 Northern Powerhouse Local Enterprise Partnerships, said: “The Government’s micro-loan scheme is welcome news for the 537,000 sole and small traders across the North, many of which are in particular need of support at this critical time.
“This funding gap has been a major priority for the Northern Powerhouse 11 LEPs over the past few weeks and we welcome the fact that the Government is taking on board the messages from the wider business community to address such challenges in a proactive manner.”