This afternoon in the Commons, Chancellor Rishi Sunak added to the raft of Coronavirus Business support measures with the announcement of Bounce Back loans of up to £50,000 for small businesses.
There are some notable differences between Bounce Back loans and the Coronavirus Business Interruption Loan Scheme (CBILS). Firstly there will be a maximum loan amount of £50,000 (or 25% of turnover whichever is the lessor) but they will be 100% backed by the Government. For many CBILS have proven tricky to access as although the Government guaranteed up to 80% of CBILS the banks themselves had to cover the remaining 20% in the case of a default.
There will be no business viability checks for the new Bounce Back loans. The only checks banks will take will be normal fraud checks to ensure that the business really exists. Applications will open next Monday the 4th of May with applications via an online form. Your bank will be able to bypass many of the fraud checks if you already have a business account with them as they will already know your business. For most firms, the money will be in your bank account within 24 hours of approval.
The Government will cover the interest for the first 12 months of the Bounce Back loans. There will be no early repayment penalties.
The Chancellor was very clear that the tax payer shouldn’t be picking up the tab for unlimited sums for businesses that have no prospect of paying it back and so the 80% guarantee for CBILS will remain. By backing the Bounce Back loans for small business at 100% but with a cap of £50,000, the Chancellor is limiting the exposure to the tax payer.
Bounce Back loan applications will open next Monday at 9am, so if you’re short of funds for maintaining your business through the Coronavirus pandemic, especially if you are waiting for other funds to arrive from varying government and third party schemes, potentially the funds could be in your bank account by next Tuesday.