Government introduces 100% government-backed business loans
Bowing under pressure, the Chancellor has announced small businesses will benefit from a new fast-track finance scheme providing loans with a 100 per cent government-backed guarantee for lenders.
Chancellor of the Exchequer 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.
Under the scheme, the government will provide lenders with a 100 per cent guarantee for the loan and pay any fees and interest for the first 12 months. Additionally, no repayments will be due during the first 12 months.
The loans will be easy to apply for through a short, standardised online application, with the funds said to reach businesses within days, providing immediate support to those that need it as easily as possible.
“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,” said Mr Sunak.
The latest scheme comes alongside the already announced business grants, tax deferrals, and the job retention scheme, which are said to be helping support hundreds of thousands of small businesses.
“Our small businesses are vital in ensuring our communities thrive and will be crucial in creating jobs and securing economic growth as we recover,” said Business Secretary Alok Sharma.
“This rapid loan scheme offers additional protection so small companies across the country can get access to the finance they need immediately, as part of the unprecedented package of support we have put in place.”
The scheme will launch for applications on Monday, 4 May, with firms able to access loans through a network of accredited lenders.
The government assured it 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.
Responding to the announcement that the government is establishing the new micro loan scheme, Federation of Small Businesses (FSB) national chairman Mike Cherry said this decision will give hope to thousands.
“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,” said Mr Cherry.
“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.”
He expressed hope that the big banks are in a position to facilitate a large number of small business loans.
“Some of their systems are already creaking under the strain, before this new system is brought in on top. Some lenders have been unable to facilitate such lending because they have not got their backroom operations in order. This issue requires urgent attention,” said Mr Cherry.