Coronavirus: Small firms offered loans of up to 拢50,000 that are 100% backed by govt
Rishi Sunak acknowledges many small businesses are still struggling to access help to "bounce back" after the COVID-19 lockdown.
Monday 27 April 2020 18:41, UK
The chancellor has announced a new coronavirus crisis aid scheme, offering small businesses up to 拢50,000 in loans that will be 100% guaranteed by the government.
Rishi Sunak told MPs the "bounce back" loans were a consequence of many firms struggling to access credit during the COVID-19 lockdown to date.
He said the microloan scheme would be in place from next Monday, with applications to banks via a simple form.
Crucially, applicants will not face a viability test - but some fraud checks will have to be completed.
"Businesses will be able to apply for these new bounce back loans for 25% of their turnover up to a maximum of £50,000 with the government paying the interest for the first 12 months," the chancellor said.
Mr Sunak said the sums involved meant the government could meet the risks associated with the scheme as he rejected calls, made by business groups, for the taxpayer to guarantee 100% of other emergency schemes.
There have been widespread reports of banks being slow and reluctant to lend to small and medium-sized businesses under the Coronavirus Business Interruption Loan Scheme (CBILS) because they are liable for 20% of the risk.
The chancellor defended the government against claims that the schemes fail to match the packages by other nations such as Switzerland in terms of cash and speed.
He insisted the UK's measures should be looked at in their totality, to include things such as business rates holidays and VAT deferrals. He argued the whole fiscal package was among the best available in the world.
"Around half a million employers have already applied for help to pay the wages of over four million furloughed jobs," he said.
Mr Sunak also told MPs more than 1.5 million new claims had been made for Universal Credit.
He added: "I've heard some calls for the government to underwrite all our loan schemes with 100% guarantees. I remain unconvinced by the case for doing that universally.
"We should not ask the ordinary taxpayers of today and tomorrow to bear the entire risk of lending almost unlimited sums to businesses who may, in some cases, have very little prospect of paying those loans back and not necessarily because of the impact of the coronavirus," the chancellor said.
The CBI, which had been among organisations demanding 100% loan guarantees, said the new microloan scheme was "transformational".
Its director general, Dame Carolyn Fairbairn, said: "Sole traders, micro-firms and entrepreneurs will now have a simple route to fast finance to stay afloat, without red tape or time-consuming checks.
"Thousands of businesses could be saved by this lifeline. Banks now need to continue their work in overdrive to get the loans flowing faster."