New micro business loans unveiled as part of COVID-19 support

  • 28 Apr 2020

The Chancellor, Rishi Sunak, has announced new “bounce back loans” for small businesses affected by the Covid-19 crisis.

The government says it will guarantee 100% of loans up to £50,000, capped at 25% of turnover, and will pay the interest for the first 12 months.

Rishi Sunak told the House of Commons the micro loan scheme would provide a "simple, quick, easy solution for those in need of smaller loans" with “no complex eligibility criteria.” He said they would be available from 9am on Monday 4 May.

These new emergency loans are in addition to the Coronavirus Business Interruption Loan Scheme (CBILS).

 

FSB had urged the government to provide a 100% guarantee on smaller loans after hearing from hundreds of members who wanted to access the emergency finance but encountered difficulties with the CBILS scheme.

CBILS itself has also been modified, including the removal from the viability test the requirement for lenders to include a ‘forward-looking’ element.

Responding to the announcements, FSB National Chairman Mike Cherry said: “While taking a loan will not be the right or palatable solution for a lot of small business owners, there are many others who have told us they do want access to emergency, government-backed loans.

"To date, the existing scheme has not been working for the small firms that make-up 99% of our business community.
 
“The decision by the Chancellor to listen to our recommendation for a 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 welcomed by those sole traders and microbusinesses wishing to access this emergency finance. Removing the need to provide forecasts marks an important step forward – small firms cannot be expected to predict the future in this climate.   

“From here, we need the right delivery. The new fast-track system must be established by next Monday with money delivered 24 hours after a successful application as promised. All those who have been declined a small coronavirus business interruption loan scheme (CBILS) facility should now be written to with the offer to re-apply via this new system. Those mid-way through a standard CBILS application should also be given the option to change tack. 
 
“Many small businesses have had to pay March and April’s payroll, on top of other overheads, with no revenue coming in at all. The CBILS initiative was their only lifeline until job retention scheme payments kicked in. It has so far proved to be extremely difficult to access for the vast majority. Today’s announcement promises to change that fundamental lack of access to working capital. 

“In the long-term, we need to protect the competition achieved in the small business lending market that so many have fought so hard to secure. At the end of this crisis, non-bank lenders are going to be key to economic recovery as part of a thriving small business finance market that does not just rely on the big five banks. We look forward to working with the Government to ensure alternative lenders can play that vital role.

 

 
 
“Equally, the big banks must ensure they’re in a position to facilitate a large a number of small business loans. Some of their systems are already creaking under the strain, before this new system is brought in on top. Some lenders have been unable to facilitate such lending because they have not got their backroom operations in order. This issue requires urgent attention.”
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