Bowing to pressure from business groups and MPs to boost the generosity of the government guarantee on its emergency loan scheme during the pandemic, the Chancellor has announced that the UKs smallest businesses will be offered 100% government-backed rescue loans.
As recently as last week he said he was “not persuaded” by calls to provide a 100% state guarantee, despite less than half of all applicants for support securing an emergency loan. In a climb down the Chancellor said small firms would be offered new “bounce back loans” from next week with full government backing.
Designed to provide smoother access to cash for small companies facing difficulty accessing existing government-backed lending, the Chancellor said businesses would be able to apply for “micro-loans” worth up to 25% of their turnover, up to £50,000.
Small companies can apply for the new loans from high-street banks from next Monday. They provide high-street banks with a guarantee that the government will refund the bank for the entire value of the loan if a borrower is unable to repay, up from 80% on the government’s existing coronavirus business interruption loan (CBILs).
No details of how the micro-loan scheme will operate are available yet except that we are told businesses will be able to borrow between £2,000 and £50,000 (subject to the 25% of turnover limit) and access the cash within days, and that the loans will be interest free for the first 12 months. Businesses can apply online through a ‘short and simple form’ from 4th May.
Questions about eligibility and the amount of information required by lenders remain unanswered at this stage; as soon as these are available I will let you know.