Due to the on-going concern about the lack of availability of loans under the Coronavirus Business Interruption Loan Scheme (CBILS), the government have yesterday announced a new scheme in what should allow small businesses to access a loan a lot quicker and easier.
Chancellor Rishi Sunak told the House of Commons the scheme would start next week, offering firms loans up to £50,000 within days of applying.
The scheme requires filling in a two-page self-certification form online.
The loan terms mean that no capital or interest repayments will be due for one year. Instead, the government will pay the interest for the first 12 months.
In another significant change, companies applying for the new loans will now only have to prove that they were viable in the past before the crisis, not that they will viable after the crisis. Companies have complained they struggled to prove their future potential with some much uncertainty over the economic environment.
Unlike the existing loan scheme, banks will not retain any of the risk for these loans, which could stretch into the billions or tens of billions depending on how long the crisis lasts.
Business leaders welcomed the move, with Dame Carolyn Fairbairn, CBI director-general Dame Carolyn Fairbairn calling it transformational for small firms.
“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,” she said. “Thousands of businesses could be saved by this lifeline. Banks now need to continue their work in overdrive to get the loans flowing faster.”
And the chairman of the Federation of Small Businesses, Mike Cherry, said it would “give hope to thousands” of firms.
“To date, the existing interruption loan 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
- Businesses can apply for a loan of up to £50,000 based on 25% of your businesses turnover.
- The government WILL guarantee 100% of the loan. This means that any business which meets the criteria should be accepted.
- The loans will be available from banks from Monday 4th May at 9am.
- There will be “no complex eligibility criteria” but just a simple application to complete.
- The loan should arrive within 24 hours of acceptance.
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