The Government announced yesterday a new 100% backed loan scheme for small business. The headline details are as follows:
- businesses will be able to borrow between £2,000 and £50,000 and access cash within days
- loans will be interest free for the first 12 months and businesses can apply online through a short and simple form
- loans will be capped at 25% of turnover
- there will be no rigorous stress testing, as with the CBILS applications
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.
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, and comes alongside the business grant awards, the job retention scheme and the tax deferrals supporting UK taxpayers and limited companies.
Business representatives have been consulting with the Government on how best to help small businesses, particularly those which only started as self-employed in 2019-20. Whilst a loan is not as attractive and helpful as a grant, access to these monies will at least be a welcome relief to many struggling business owners. The loans will be interest free for the first year, with no set-up charges and no repayments for the first year also.
The loans will be easy to apply for through a short, standardised online application. The loan should reach businesses within days- providing immediate support to those that need it as easily as possible.