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Small firms are the target audience for the channel, many of which have been hard hit by the coronavirus lockdown since they are unable to open stores and offices.
The Chancellor has moved to ease the financial difficulties small firms are facing with the launch of a Bounce Back Loan scheme that comes into force next week.
Chancellor Rishi Sunak made a statement in the House of Commons yesterday, outlining a plan to make up to £50,000 available for firms within days of applying.
Although there are already some relief schemes in place, there has been criticism that banks are taking too long to get the funds into the hands of businesses. The banks’ defence has included pointing out that they have been working through credit checks with a shortage of staff.
The latest scheme, which starts on 4 May, involves firms filling in a two-page form which simply requires them to prove they were viable before the crisis started. No interest or capital repayments will be required for the first year, with the government picking up the interest fees.
“Our smallest businesses are the backbone of our economy and play a vital role in their communities. This new rapid loan scheme will help ensure they get the finance they need quickly to help survive this crisis,” said Sunak.
“This is in addition to business grants, tax deferrals and the job retention scheme, which are already helping to support hundreds of thousands of small businesses,” he added.
The move was welcomed by some of those organisations that represent small businesses, which viewed the 100% government-backed guarantee as crucial to ensure the banks helped firms.
Mike Cherry, national chairman of the Federation of Small Businesses (FSB), said existing loan schemes had failed to hit the target for many firms.
“To date, the existing interruption loan scheme has not been working for the small firms that make up 99% of our business community,” he added. “The decision by the Chancellor to listen to our recommendation for a 100% guarantee on smaller loans, alongside the creation of a fast-track system for those applying for them, will give hope to thousands.
“All those who have been declined a Coronavirus Business Interruption Loan Scheme [CBILS] facility should now be written to with the offer to re-apply via this new system. Those mid-way through a standard CBILS application should also be given the option to change tack,” he said.
Carolyn Fairbairn, director general at the CBI, also welcomed the move by the Chancellor to make it easier for small firms to access funds.
“Thousands of businesses could be saved by this lifeline. Banks now need to continue their work in overdrive to get the loans flowing faster,” she said.
“It’s good to see the Chancellor listening to business, proving that where there’s a need to adjust schemes, he will do what it takes. It will be vital to maintain this approach in the months to come. Every job saved today will ensure a faster recovery tomorrow,” she added.
The Bounce Back Loan
- Businesses will be able to borrow between £2,000 and £50,000 and access the cash within days of applying.
- Loans will be interest free for the first 12 months, and businesses can apply online through a short and simple form.
- The government will provide lenders with a 100% guarantee for the loan, and pay any fees and interest for the first 12 months. No repayments will be due during the first 12 months.
- The scheme will launch for applications on Monday 4 May.
- Firms will be able to access these loans through a network of accredited lenders.