Govt's Bounce Back Loan Scheme launched

UK businesses have started applying for loans of up to £50,000 through the Government’s Bounce Back Loan Scheme which launched today.

The Treasury said its new scheme will be delivered by lenders accredited by the British Business Bank to target small and micro businesses in all sectors, providing loans from £2,000 up to 25% of the business’ turnover, with a maximum loan of £50,000.

The new scheme is to offer smaller amounts than the existing Coronavirus Business Interruption Loan Scheme (CBILS), which has been lending to businesses with turnover of up to £45m.

The loans, which have a 2.5% interest rate, will also provide lenders with a “100% guarantee” backed by the Government – meaning the borrower will always remain 100% liable for the debt – while standardising of the scheme’s application form is expected to lead to a faster process, with many loans to become available within days.

IW Capital CEO and founder, Luke Davis, commented: “This is a hugely positive step in the short-term for small and micro businesses who are in desperate need of survival capital. For businesses with more than around ten employees, however, this is likely only to cover a month or two of expenditure and with no end in sight for lockdown, much more support will likely be needed.

“The CBILS has come under massive scrutiny both for who is guaranteeing the cash and the time it takes to process the payments.

“This addition will undoubtedly save many businesses in dire need of funds, but it will not be a game-changer for most. This is especially true of early-stage loss-making companies or those without the requisite three years trading.

“This is where private finance is going to be more important than ever. Investors are starting to realise that there are opportunities out there to support great businesses – sometimes at a reduced cost. So, while debt may be more available than ever before, equity finance will remain a key route to saving firms from going under and, crucially, helping some to grow.”

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