5:52 pm, April 27, 2020
The chancellor has unveiled ‘bounce back’ loans of up to £50,000 for small firms and the government will pay the interest for the first 12 months.
The loans – available from Monday – will see the government shoulder the risk with a 100 per cent guarantee for small firms that have struggled to access funding.
Many smaller independent car dealerships had been struggling to access loans and this will come as a welcome relief.
Sunak said he knew some small firms were struggling to access credit, and by guaranteeing the full value of the loan he hopes lenders will allow companies to borrow what they need.
He told MPs: ‘I know that some small businesses are still struggling to access credit. They are in many ways the most exposed businesses to the impact of the coronavirus and often find it harder to access credit in the first place.
‘If we want to benefit from their dynamism and entrepreneurial spirit as we recover our economy, they will need extra support to get through this crisis.’
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But he rejected calls for the government to underwrite other coronavirus loan schemes with a 100 per cent guarantee, insisting his new plan would ‘carefully target’ the level of state support at those who need it most.
The new ‘microloan scheme’ would provide a ‘simple, quick, easy’ solution, he said.
Businesses will be able to apply for the loans for 25 per cent of their turnover up to a maximum of £50,000 with the government paying the interest for the first 12 months.
The loans will be available from 9am on Monday, with ‘no forward-looking test of business viability, no complex eligibility criteria, just a simple, quick standard form for businesses to fill in’.
No repayments will be due in the first 12 months of the bounce back loans.
The government has already allocated £15bn of support in response to the economic devastation caused by the virus and the lockdown measures, and Sunak warned of more tough times to come.
‘We should be in no doubt about the seriousness of the economic situation,’ Sunak said.
CBI director-general Dame Carolyn Fairbairn said the scheme could be ‘transformational’, adding: ‘Banks now need to continue their work in overdrive to get the loans flowing faster.’
Federation of Small Businesses national chairman Mike Cherry said: ‘This crucial new initiative should enable thousands of small businesses to access the working capital they need quickly, helping to protect the millions of jobs they provide in every part of the UK.’
Source: PA Media
