New 100% government backed bounce back loan scheme for small business

28 Apr 2020

In a step to extend the existing package of state-funded support available to businesses, Rishi Sunak announced (Monday 27 April) that the government is making available a new fast-track finance scheme providing loans with a 100% government-backed guarantee for lenders. In summary:
  • businesses will be able to borrow between £2,000 and £50,000 and access the cash within a matter of days
  • loans terms will be up to six years
  • loans will be interest free for the first 12 months (as fees and interest will be paid by the government for this period)
  • no capital repayments will be due during the first 12 months 
The new Bounce Back Loans scheme, which launches on 4 May 2020, will provide loans of up to £50,000 and businesses will be able to apply via a short, online application form. The scheme has been designed to ensure that small businesses requiring vital cash injections to keep operating can have access to funds in a matter of days.
 
Most notably, businesses applying for this new scheme will only have to prove that they were viable before the pandemic. The struggle to date with the existing schemes has been for businesses to show their future potential amongst the uncertainty of the economic climate.
 
In comparison to the other schemes available, the 100% state-backed guarantee removes exposure for the lenders offering these loans, where other schemes have exposed lenders to 20% of the risk. Businesses who have already received funding under the Coronavirus Business Interruption Loan Scheme will not be able to apply, though the government has confirmed that until 4 November 2020 you can apply to your lender to transfer your funding to the Bounce Back Loan scheme.
 
In his statement yesterday, Rishi Sunak reiterated that he “remained unconvinced” of the argument for rolling out a 100% government backed guarantee across all the available funding schemes. He said “We shouldn’t ask taxpayers to bear all the risk of lending almost unlimited sums to businesses who may have very little prospect of paying those loans back – and not necessarily because of coronavirus”. Sunak confirmed that “Instead, the Bounce Back Loans carefully target the extraordinary level of state support at those who need it the most”.
 
The scheme will open on 4 May 2020 and businesses will be able to apply via the government site. More information about the scheme is due to be published before its launch, all of which will be available  here.
 
 

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