It has been announced that a new micro-loan scheme, ‘bounce back loans’, will be available for more than five million small businesses struggling to access credit.
The loans will range between £2,000 and £50,000 (capped), up to the value of 25% of annual turnover and will be available for all firms trading as of March 1. The effective £200,000 limit means it would cover all of the UK’s 5.6 million micro-businesses with up to nine employees.
These loans will be interest-free for the first 12 months and funds will be accessible within 24 hours of approval – providing immediate support to those that need it as easily as possible. The new lending programme will be backed by a 100 per cent taxpayer guarantee and is intended to ensure that businesses floundering in the wake of the lockdown get the support they need.
Rishi Sunak, said: “Our smallest businesses are the backbone of our economy and play a vital role in their communities. This new rapid loan scheme will help ensure they get the finance they need quickly to help survive this crisis.”
Dominic Bourquin, Partner at MHA Monahans has said: “This is welcome support for the smallest businesses, who have found it difficult to access funding under the larger schemes, and if the Government’s announcement is to be believed means funds should be accessible quickly. However, we would sound a couple of notes of caution, firstly around the ability of the banks to quickly process these and other funding support applications, so if you want this sort of loan apply early as it may take some time to be accepted, due to resource problems in the banks and secondly, beware the interest rate that will apply at the end of the 12 month interest free period – this is not subject to any cap, so it may prove to be a very expensive source of funding.”