The Chancellor has announced further funding for small and medium sized businesses in the form of the new Bounce Back Loans scheme. This new scheme is due to start on Monday 4th May, and will run alongside existing funding through the Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS).
Under this scheme qualifying businesses can borrow between £2,000 and £50,000 from accredited lenders, with the loan being 100% guaranteed by the government, and with no requirement for personal guarantees needed to be given.
Details of the scheme
- Businesses will be able to access loans worth up a maximum of £50,000;
- Loans will be interest free for the first 12 months;
- No repayments will be due within the first 12 months; and
- Loans can be for a term of up to 6 years.
- Business must be based in the UK
- It must have been negatively affected by coronavirus
- It must not have been an ‘undertaking in difficulty’ on 31 December 2019
This is welcome news and a potential lifeline for small businesses that may have been struggling to access funding under CBILS, and have not been a qualifying business for other available funding, such as those grants available linked to business rates for the retail and hospitality sector.
It is hoped that the use of a simple standardised online application form and providing 100% guarantees to the lender, along with removing the requirement for personal guarantees, will speed up the application process so that cash can be in the hands of the borrower in a matter of days rather than weeks.
It is also hoped that this new scheme should take some pressure away from lenders dealing with the CBILS funding scheme, allowing them to deal with larger financing requests by encouraging borrowers at the lower end to use this new scheme if it meets their needs.
As always, the devil will be in the detail, especially surrounding the eligibility criteria when completing the application forms. We will keep you updated as and when further details of the scheme are released.