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Chancellor Rishi Sunak has announced another new loan scheme aimed at supporting SMEs – and the news that the scheme will open on Monday, May 4 has been well received.
The ‘Bounce Back Loan Scheme’ will hopefully be a quick solution for businesses that have been unable, or unwilling to, access the existing Coronavirus Business Interruption Loan Scheme (CBILS) loans.
Crucially, these loans will be 100% guaranteed by the Government, which should make the process easier with lenders and ensure that release of the funds is significantly quicker than the CBILS loans.
We have found some clients left waiting three weeks for decisions from banks on their CBILS applications.
We will have to wait and see if the guarantee makes the process faster this time around. But nonetheless, the 100% Government guarantee is very welcome.
Businesses will be able to borrow between £2,000 and £50,000 and the cash should be delivered to successful applicants within days.
The loans will be for up to six years, with no repayments and no interest for the first 12 months.
Although, they are still loans, and businesses must be aware they will still need to be repaid further down the line.
It is yet to be outlined what the interest rate would be on these loans, and we assume no personal guarantees are required, but this is yet to be clarified.
The Bounce Back Loan scheme is capped at 25% of turnover and promises a streamlined application process involving no more than two pages of questions.
The definition of an ‘eligible company’ has been outlined but, as we are finding with many coronavirus business support measures, clarification of what businesses are eligible for is needed.
Currently, the eligibility criteria says businesses must be based in the UK, been negatively affected by coronavirus and was not an ‘undertaking in difficulty’ on December 31, 2019.
You cannot apply for a Bounce Back Loan if already claiming under the CBILS scheme, however if a business has a CBILS loan of less than £50,000 this can be transferred to a Bounce Back loan by speaking with your lender before 4th November 2020.
The speed at which the economy recovers will be largely dependent on the resilience of the country’s SME businesses, and it is hoped that this scheme will help plug one of the major gaps in support previously announced.
Stay safe and stay positive!