On Monday (27 April) the chancellor announced a new 100% government backed loan scheme for small businesses after they raised concerns about slow access to existing coronavirus rescue schemes.
Previously the loan support available for businesses included the Coronavirus Business Interruption Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme (CLBILS). Essentially this scheme would be the ‘Small’ version of this – but instead of being called CSBILS, it is called the Bounce Back Loans scheme.
This new scheme will allow businesses to borrow between £2,000 and £25,000 and access the cash within days. Loans will be interest free for the first 12 months, and businesses can apply online through a short and simple form. They should have the money in their accounts within 24 hours.
This new Bounce Back Loans scheme will complement the existing CBILS and CLBILS scheme, which support businesses and larger businesses respectively.
Chancellor Rishi Sunak told the House of Commons the scheme would start next week, offering firms loans up to £50,000 within days of applying.
It aims to unlock a backlog of credit checks by banks amid fears many small firms could fold before getting loans.
The scheme requires filling in a two-page self-certification form online.
The loan terms mean that no capital or interest repayments will be due for one year. Instead, the government will pay the interest for the first 12 months.
Banks have come under fire for delays in handing out loans, but have blamed the heavy workload, need to complete the necessary credit checks, and a shortage of staff.
Underwriting the loans removes the risk that banks will not get their money back, which Mr Sunak hopes will speed up the application process. The new "microloan scheme" would provide a "simple, quick, easy" solution, he told the Commons.
In a statement issued on behalf of the major lenders to small firms, including Barclays and Lloyds, trade body UK Finance said the "welcome changes should enable banks to provide finance to businesses more quickly".