As the coronavirus pandemic continues to loom over the UK’s economy, it is perhaps the smallest companies that are bearing the brunt of the issue.
So said chancellor Rishi Sunak, as he addressed Parliament yesterday: “They are, in many ways, the most exposed businesses to the impact of the coronavirus.”
With this in mind, he took to Parliament with details of a new micro-loan scheme that aims to fix cash flow problems for the country’s smallest firms: the Bounce Back Loan Scheme.
“In a matter of days”
Intending to provide “fast track finance”, the scheme has been designed to be a “simple, quick and easy solution” to cashflow problems. Small businesses, defined as a firm with less than 50 employees and the category many UK-based design businesses will fall under, will be able to borrow cash sums from lenders for 25% of their turnover, up to a maximum of £50,000.
Unlike loans available through the Coronavirus Business Interruption Loan Scheme (CBILS), Bounce Back loans will be guaranteed 100% by the government – the government has previously dragged its feet on 100%-backing loans, and CBILS loans are only backed 80%.
And again, in contrast to other schemes put forward so far, money loaned through this scheme will be available “in a matter of days” – so designers with immediate cash issues should in theory be covered. Most businesses, supposedly, will receive money within 24 hours of approval.
“There will be no forward-looking tests of business viability; no complex eligibility criteria; just a simple, quick, standard form for businesses to fill in,” he added.
Useable in conjunction with other schemes
In his explanation of the new package, Sunak acknowledged that many small businesses would likely not want to take on more debt – which is why previous finance schemes have focused on cash grants, tax cuts and tax deferrals.
“But for others, loans will be part of the answer,” he continued, adding that the money received through the Bounce Back Loan Scheme could be used in conjunction with the various other support schemes offered by the government.
Additionally, the government will pay the first 12 months’ fees and interest, with no repayments due during this period either.
The scheme will open for applications from 4 May, and will be accessible through “a network of accredited lenders”.
What has been offered so far?
News of the Bounce Back Loan Scheme follows weeks of other financial support package announcements from the government. Here is a breakdown of what has been offered so far:
- The Coronavirus Job Retention Scheme (CJRS): in a bid to save jobs, companies are encouraged to temporarily furlough staff instead. The government has promised to pay 80% of any furloughed employee’s salary (up to £2,500) to facilitate this.
- The Coronavirus Business Interruption Loan Scheme (CBILS): aimed at supporting the UK’s SMEs (with an annual turnover of less than £45 million), this scheme provides access to loans, overdrafts, invoice and asset finance of up to £5 million for up to six years. Loans are guaranteed 80% by the government and they will also pay the first 12 months of interest.
- The Self-Employed Income Support Scheme (SEISS): similar to the CJRS in some ways, this scheme is aimed at helping the country’s five million self-employed workers by offering a taxable grant worth 80% of average trading profits (up to £2,500 a month – taken from the last three years’ tax returns).
For more information on the schemes on offer, visit the gov.uk website.