Rishi Sunak unveils 100 per cent state-backed ‘bounce back loans’ for small businesses
The UK’s smallest businesses will have guaranteed access to loans of up to £50,000 within 24 hours of applying, chancellor Rishi Sunak announced today.
The new “bounce back loans” will be 100 per cent guaranteed by the Treasury, meaning the government will take on all the default risk, and will be available from next Monday at 9am.
Small businesses will be able to access loans worth 25 per cent of their turnover, up to £50,000, and the government will pay the interest for the first 12 months.
Sunak said banks will not need to perform any “forward looking tests of businesses viability” and that businesses would need to fill out just a “simple, quick, standard form”.
Businesses will not even need to provide proof of turnover in the application process.
“I know some small businesses are still struggling to access credit – they are in many ways the most exposed to the effects of the coronavirus,” Sunak said.
“They will need extra support to get through this crisis. Some businesses will not want to take on more debt…but for some others loans will be a part of the answer.”
The new loans are separate from the government’s £330bn coronavirus business loan scheme.
Businesses are not able to apply for loans from both schemes, according to a Treasury Spokesman.
Sunak said he “remained unconvinced” that the government should underwrite 100 per cent of all loans, regardless of the size of the business.
“I’ve heard some calls to underwrite all our loan schemes with 100 per cent guarantees,” he said.
“We should not ask ordinary taxpayers today and tomorrow to bare the entire risk of lending almost unlimited sums to some businesses that have very little prospect of paying those loans back and not necessarily because of the impact of the coronavirus.”
The government’s £330bn coronavirus loan schemes – the coronavirus business loan scheme (CBILS) and the coronavirus large business loan scheme (CLBILS) – have been widely panned since their roll out.
The banking sector has been criticised for the loan approval process taking too long and for it being too restrictive for struggling businesses.
Just over 20,000 loans have been approved in the scheme’s first month.
Shadow chancellor Anneliese Dodds said more needed to be done to ensure loans were delivered to businesses at speed through CBILS and CLBILS.
“While it’s a relief to hear from the Chancellor that there will now be a full guarantee for loans of up to £50,000, we need to know that normal commercial loan requirements will not continue to clog up the system,” she said.
Federation of Small Businesses national chair Mike Cherry welcomed the announcement of the new loan scheme.
“To date, the existing interruption loan scheme has not been working for the small firms that make-up 99 per cent of our business community,” he said.
“The decision by the chancellor to listen to our recommendation for a 100 per cent guarantee on smaller loans, alongside the creation of a new fast-track system for those applying for them, will give hope to thousands.
“The headline terms will be hugely welcomed by the sole traders and micro businesses that make-up 95 per cent of the small businesses community. Removing the need to provide forecasts marks an important step forward – small firms cannot be expected to predict the future in this climate.”