Small businesses will be able to access 100% taxpayer-backed micro loans from Monday, 4th May after concerns were raised about the speed of access to existing COVID-19 rescue schemes.
Chancellor Rishi Sunak told the House of Commons on 27th April that the new Bounce Back Loans scheme would offer businesses loans for 25% of their turnover, up to a maximum of £50,000, with the Government paying the interest for the first 12 months. New legislation was passed on 1st May ahead of the launch date to facilitate the administration of the scheme.
Sunak stated: “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. For most firms, loans should arrive within 24 hours of approval.”
Unlike the existing Coronavirus Business Interruption Loan Scheme, banks will not retain any of the risk for the Bounce Back Loans.
The Government hopes that the Bounce Back Loans scheme will free up a backlog of credit checks by banks amid fears many small businesses could go to the wall before getting desperately needed loan funding. The scheme requires applicants complete a two-page self-certification form online, while the loan terms mean no capital or interest repayments will be due for one year.
Banks have been facing increasing pressure for delays in granting loans, but have blamed the heavy workload, having to complete the necessary credit checks, and staff shortages
Earlier this month the Governor of the Bank of England, Andrew Bailey, said that slow bank emergency lending “had to be sorted out” and that taking on all the risk from banks could “unblock” the schemes for small business especially.
Mike Cherry, National Chairman of The Federation of Small Businesses (FSB) said that the “100% guarantee on smaller loans, alongside the creation of a new fast-track system for those applying for them, will give hope to thousands. The headline terms will be hugely welcomed by the sole traders and micro businesses that make-up 95% of the small businesses community. Removing the need to provide forecasts marks an important step forward – small firms cannot be expected to predict the future in this climate."
Date published 27 Apr 2020 | Last updated 25 Sep 2020
Choose the right accounting firm for you
Running your own business can be challenging so why not let TaxAssist Accountants manage your tax, accounting, bookkeeping and payroll needs? If you are not receiving the service you deserve from your accountant, then perhaps it’s time to make the switch?
We specialise in supporting independent businesses and work with 80,684 clients. Each TaxAssist Accountant runs their own business, and are passionate about supporting you.
We enjoy talking to business owners and self-employed professionals who are looking to get the most out of their accountant. You can visit us at any of our 409 locations, meet with us online through video call software, or talk to us by telephone.
Changing accountants is easier than you might think. There are no tax implications and you can switch at any time in the year and our team will guide you through the process for a smooth transition.