The Chancellor, Rishi Sunak, has launched 100% state-sponsored “Bounce Back” loans for the UK’s smallest businesses.
The loans will be available from Monday 4 May 2020 and businesses will be able to borrow a maximum of £50,000, or 25% of their turnover, over a period of up to 6 years. There will be no interest payable in the first year and the loans could be within bank accounts within a day of applying.
The announcement comes after widespread criticism of the previously announced Coronavirus Business Interruption Loan Scheme (CBILS), because the application process was taking too long and lenders were making it too complicated.
Under CBILS, firms with a turnover of up to £50m are allowed to apply for loans of up to £5m with 80% of the debt backed by the government. However, as of last week, less than half of applications had been successful, with only 16,000 loans approved compared to more than 250,000 similar loans in France and 100,000 in Switzerland.
Small firms applying under the new scheme need to fill out a simple, two page online form. They will only need to prove they were viable before the coronavirus outbreak as banks will not need to perform any tests of businesses future viability. Businesses won’t need to go to their current bank and will have the choice of a panel of lenders. They will also have the option of repaying loans back early.
Rishi Sunak said:
“Smaller businesses will be able to get up to £50,000 very easily with a simple, standardised form and have the money within 24 hours.
“It will make an enormous difference to millions of small businesses around the UK.
“It will be much easier for a business to tick the boxes if they’re eligible, which the vast majority of them will be.”