In the House of Commons earlier today, Chancellor Rishi Sunak announced an offer of 100% guarantees on “bounceback loans” of up to £50,000 for the smallest businesses affected by the coronavirus pandemic.
Mr Sunak told the House of Commons that the new micro-loan scheme is designed to help small businesses struggling to access credit during the current lockdown.
Companies will be able to apply for bounceback loans, free of interest for the first 12 months, up to the value of 25% of their turnover, up to a cap of £50,000.
Available from 9am next Monday, the loans will not be subject to business liability tests or complex eligibility criteria, he said.
He described this new lending scheme as “a simple, quick, easy solution for those in need of smaller loans”, Mr Sunak said that most eligible firms will be able to access them by filling out a standard form, with funds available within 24 hours of approval.
Mr Sunak resisted pressure to increase the current 80% guarantee on loans under the Coronavirus Business Interruption Loan Scheme (CBILS) to cover their full value.
Businesses and banks have blamed the limit to the guarantee for the slow provision of the emergency credit, which has so far seen just 16,000 CBILS loans issued. Setting out his rationale for rejecting a broader extension, the chancellor said:
“I’ve heard some calls for government to underwrite all our loan schemes with 100% guarantees. I remain unconvinced by the case and for doing that universally.
“We should not ask the ordinary taxpayers of today and tomorrow to bear the entire risk of lending almost unlimited sums to businesses who may in some cases have very little prospect of paying those loans back, and not necessarily because of the impact of the coronavirus.
“So I do not think it is appropriate to provide 100% guarantees on all of our schemes.
“Instead, these new bounceback loans carefully target that extraordinary level of state support at those who need it most. And the £50,000 balances the risk to the taxpayer with the need to support our smallest businesses.”
As always, as we know more about this scheme we will let you know.