COVID-19: The Chancellor Rishi Sunak unveils 100% government backed bounce-back loans.
Last week, the Chancellor Rishi Sunak unveiled new support for Britain’s smallest businesses under which they will be able to borrow up to £50,000, with the government underwriting the entire loan.
The so-called bounce-back loans to be provided by commercial lenders — which will be interest-free for the first year, with the government paying any fees — will help companies currently struggling to access credit, Mr. Sunak told MPs.
This is in response to UK’s micro-companies amid the coronavirus pandemic having problems securing credit through the government’s coronavirus business interruption loan scheme that is meant to be focused on small and medium-sized enterprises.
Some businesses have said they do not meet the criteria for the scheme, while others have complained about long delays by lenders in processing their applications.
The bounce-back loans would be available from next Monday, with businesses asked to fill in a “quick standard form” under the scheme. Most would be issued without the use of personal guarantees against the loans supplied by directors, added officials.
This will also be relatively cheap finance, so micro-companies may choose to use the scheme even if they do not need to. It could be one way of paying back a credit card bill, said one banker.
The Treasury has introduced two technical changes which are expected to accelerate the flow of lending through the scheme.
- First, instead of having to assess whether a business is still viable during the pandemic, lenders will now only have to decide if the company was a going concern beforehand.
- Second, a previous rule that meant the government would only guarantee 60 per cent of a lender’s portfolio of loans issued under the scheme has been eliminated.
I wish you all the best at this challenging time.