The Government has announced a new funding scheme for small businesses, enabling them to access loans of between £2k and £50k. The scheme is 100% Government backed and is designed specifically to ensure that loans can be accessed very quickly by those businesses that qualify for the scheme.
The loans are called “Bounce Back Loans” and the Chancellor has said that this microloan scheme will be in place from Monday 4th May. Applications will be made to a participating bank via a simple form, with no viability checks, and funds being made available within days.
The amount of the loan will be capped at 25% of the turnover of the business, up to a maximum of £50k. Like the funds provided under the Coronavirus Business Interruption Loan Scheme (“CBILS”), the loans will be for up to 6 years in length, will be interest free for 12 months and in addition there will be no capital repayments due for the first 12 months. However, the critical difference is that the loans will be 100% backed by the Government, which means that they should be made available quickly and efficiently to the businesses that need them. The CBILS has only 80% Government backing which is perceived to be a key reason for the delays in making funds available, with a heavy backlog due to the viability checks required.
Firms can apply if they are based in the UK, negatively affected by Covid-19 and were not an ‘undertaking in difficulty’ at the end of 2019. They will be able to access these loans through a network of accredited lenders. The Government will work with lenders to ensure that 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.
This scheme will run alongside the existing CBILS and Coronavirus Large Business Interruption Loan Scheme (“CLBILS”). If you’ve already received a loan of up to £50k under CBILS and would like to transfer it into the Bounce Back Loan scheme, you can arrange this with your lender until 4 November 2020. The Government has also indicated that it plans to take additional steps on CBILS to ensure that lenders have the confidence required to process finance applications quickly, including removing the per lender portfolio cap for the Government guarantee, and changing the viability tests to focus on simply whether a business was viable pre Covid-19.
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