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Small businesses boosted with new 100% government-backed loan scheme

The information and any opinions contained in this summary are for general information purposes only, are not intended to constitute legal or other professional advice and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances.

Since the UK entered lockdown five weeks ago, the concern for future of the high street has grown substantially and there has been criticism that the finance available through the Coronavirus Business Interruption Loan Scheme is not reaching the businesses who need it now quick enough. This has put an increasing pressure on the Government to provide a solution and yesterday (27 April 2020) the Chancellor of the Exchequer Rishi Sunak announced a new Bounce Back Loan Scheme which will be available next week and can be applied for online through a short and simple form. In this article we look at what this is, when it will be available and how this compares to the Coronavirus Business Interruption Loan Scheme.

Upon announcing the loan, Chancellor Rishi Sunak 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.”

Business Secretary Alok Sharma added: Our small businesses are vital in ensuring our communities thrive and will be crucial in creating jobs and securing economic growth as we recover. This rapid loan scheme offers additional protection so small companies across the country can get access to the finance they need immediately, as part of the unprecedented package of support we have put in place.”

Type of business and eligibility: Small and Medium-sized businesses (SMEs) based in the UK which has been negatively affected by Coronavirus and was not an ‘undertaking in difficulty’ on 31 December 2019.
What it is: A new 100% Government-backed loan scheme with no arrangement fees and no interest payable for the first 12 months. No repayments will be due during the first 12 months.
Finance available: between £2,000 and £50,000
Timescale: Up to 6 years
Benefits: Easy to apply through a short, standardised online application, and the loan should reach businesses within days, providing immediate support to businesses that need is.
When: The scheme will launch for applications on Monday 4 May and will be accessible through a network of accredited lenders. Funds should reach businesses within 24 hours of approval.

You cannot apply if you are already claiming under the Coronavirus Business Interruption Loan Scheme, but you can arrange for it to be transferred into the Bounce Back Loan Scheme with your lender until 4 November 2020.

You can find out more information about the Bounce Back Loan Scheme on the Government’s website.

Why should I consider a Bounce Back Loan over the Coronavirus Business Interruption Loan?

There are some similarities between the Bounce Back Loan and the Coronavirus Business Interruption Loan:

  • Both available to SMEs (small and medium-sized businesses)
  • Both for a loan of up 6 years
  • Both have no upfront costs

The main differences of the Bounce Back Loan are:

  • 100% backed by the Government
  • Once approved businesses will get access to the finance in a matter of days
  • No fees or interest for the first 12 months
  • No repayments will be due during the first 12 months

How do I know which financial support package is best for my business?

The Government have a package of support measures available in response to the coronavirus pandemic but what support can you get for your business and which is the best for your needs? We have put together some information on the schemes which are relevant to a retail business, which you can read by clicking here. If you still unsure what schemes you are eligible for, you can use the Government’s business support finder.

What do business representatives think of the scheme?

Mike Cherry, National Chairman of the Federation of Small Business has commented on the announcement of the new loan scheme and the impact it could have:

“This crucial new initiative should enable thousands of small businesses to access the working capital they need quickly, helping to protect the millions of jobs they provide in every part of the UK.

This step forward marks another decisive intervention from the Treasury and the Business Department, building on existing support in an innovative way. Swift delivery is now key, and we also look forward to working with Government in the long-term to enhance market competition, including that provided by non-bank lenders.

We are pleased to see the Chancellor and the Business Secretary listening to the needs of small businesses, and we will continue to work with them to make sure small firms and the jobs they provide are protected throughout this public health challenge and that small firms are at the forefront of leading the recovery.”

What can The Retail Mutual do for your business?

We fully appreciate that these are uncertain times for many businesses and help answer some of the recurring questions, we have created a Coronavirus resource hub which contains FAQs, lots of useful government links and information as well as other useful content that can assist you through this time.

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