Government launches new small business micro-loan scheme

Updated 28 April 2020

The chancellor has announced a new Bounce Back loan scheme, allowing small businesses hit by the impact of coronavirus measures to apply for up £50,000, with the government guaranteeing 100% of the advance.

Billed by chancellor Rishi Sunak as a “simple, quick, easy solution for those in need of smaller loans,” businesses can apply from lenders using a two-page standard form with no forward-looking business viability tests or eligibility criteria.

According to an accompanying government press release, businesses can apply for a minimum of £2,000 up to a maximum of £50,000, or 25% of business turnover, with the government paying the interest for the first 12 months.

The scheme will open from 9am next Monday (4 May 2020), and according to the Chancellor most loans will be paid within 24 hours of approval. Businesses will be able to access the loans through the existing network of accredited lenders.

The main features of the scheme are:

  • The scheme will launch on 4 May 2020.
  • Small and medium-sized business can borrow between £2,000 and £50,000.
  • The government will guarantee 100% of the loan and there will not be any fees or interest to pay for the first 12 months.
  • Loan terms will be up to 6 years.
  • No repayments will be due during the first 12 months. The government will work with lenders to agree a low rate of interest for the remaining period of the loan.
  • Businesses based in the UK that have been negatively affected by coronavirus and were not an ‘undertaking in difficulty’ on 31 December 2019 will be able to apply.
  • Businesses already claiming under Coronavirus Interruption Loan Scheme (CBILS) cannot apply.
  • If you have already received a loan of up to £50,000 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.

More information about the scheme will be published shortly.

It appears that the government is listening to concerns and these new loans should help speed up the process of getting money to small businesses. However, we still believe that taking on debt is not going to be suitable for some, especially smaller businesses, and we would like to see greater use of grants as part of the overall support package.

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