Small businesses will be able to access 100% taxpayer-backed micro loans after concerns were raised about the speed of access to existing COVID-19 rescue schemes.
Chancellor Rishi Sunak told the House of Commons on 27th April that the new Bounce Back Loans scheme would start on Monday 4th May, offering businesses loans for 25% of their turnover, up to a maximum of £50,000, with the Government paying the interest for the first 12 months.
Sunak stated: “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.”
Unlike the existing Coronavirus Business Interruption Loan Scheme, banks will not retain any of the risk for the Bounce Back Loans.
The Government hopes that the Bounce Back Loans scheme will free up a backlog of credit checks by banks amid fears many small businesses could go to the wall before getting desperately need loan funding. The scheme requires applicants complete a two-page self-certification form online, while the loan terms mean no capital or interest repayments will be due for one year.
Banks have been facing increasing pressure for delays in granting loans, but have blamed the heavy workload, having to complete the necessary credit checks, and staff shortages
Earlier this month the Governor of the Bank of England, Andrew Bailey, said that slow bank emergency lending “had to be sorted out” and that taking on all the risk from banks could “unblock” the schemes for small business especially.
And last week, Craig Beaumont, Director of External Affairs and Advocacy at The Federation of Small Businesses (FSB) had stated how vital it was that firms needing access to loans were fast-tracked through the process.
“They shouldn’t be held up by unnecessary barriers,” said Mr Beaumont. "This underlines the need for a new approach for smaller loans that does not warrant all this bureaucracy.”
Member since: 17th March 2014
Hello! I'm Penny from thebestof Sudbury, shouting about the best local businesses from Hadleigh through the Clare. When I'm not doing that, you'll find me knitting socks or tending to my 6 chickens