A new measure to help small businesses affected by the coronavirus pandemic has been announced by the Chancellor. Here, Andrew Diver, head of tax, examines the ins and outs of the bounce back loans scheme.
The new scheme announced by Chancellor Rishi Sunak will enable businesses to borrow between £2,000 and £50,000 and access the cash within days.
The previous Coronavirus Business Interruption Loan scheme minimum loan amount was £25,000 which was too much debt for many small businesses to contemplate taking on.
The new bounce back loan scheme will be:
- Up to a maximum of £50,000 or 25% of turnover
- The Government will pay the interest for the first 12 months
- Available from banks from 9am on May 4, 2020
- Loans should arrive within 24 hours of approval
The Chancellor said: “Our smallest businesses are the backbone of our economy and play a vital role in their communities.
“This new rapid loan scheme will help ensure they get the finance they need quickly to help survive this crisis.
“This in addition to business grants, tax deferrals, and the job retention scheme, which are already helping to support hundreds of thousands of small businesses.”
The loans are open to applications online via a short and simple two-page form. There will be no forward-looking tests of business viability or complex eligibility criteria.
Firms will be able to access the loans through a network of accredited lenders.
The government will work with lenders to ensure the loans are advanced as quickly as possible and agree a low standardised level of interest for the remainder of the loan term.
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Government guidance on bounce back loans is available here: https://www.gov.uk/government/news/small-businesses-boosted-by-bounce-back-loans