The Chancellor has introduced Small Business Bounce Back Loans, to help the smallest businesses – which he describes as the backbone of our economy – providing the finance they need quickly, to help them survive this crisis.
The new fast-track finance scheme provides a 100% government-backed guarantee for lenders and will provide loans of up to £50,000 to support businesses affected by Covid-19.
According to the government, the scheme has been designed to ensure that small firms which need vital cash injections to keep operating, can get finance in a matter of days. The loans will be easy to apply for through a short online application. The loan should reach businesses within days- providing immediate support to those that need it as easily as possible.
The government will provide lenders with a 100% guarantee for the loan and pay any fees and interest for the first 12 months. No repayments will be due by the business during the first 12 months.
Cathal Murray, solicitor with James McNulty & Co. Solicitors, states that “it seems an excellent scheme in theory, but business owners need to be aware of the longer term cashflow issues it could cause. Immediate cash injection is crucial for so many businesses at the moment and the 12 months’ relief on repayments is most welcomed. However, the next year will be a battle for most businesses trying to restore income to previous levels. When it then comes to making repayments in 12 months this could create difficulties.
It also should be noted that the business is primarily liable to repay the loan and the Government guarantee to the banks only kicks in after the lender is unable to recover the loan from the business.
Therefore, any business that applies for a Bounce Back Loan needs to ensure they are prepared for the repayments in the long-term.”
The scheme will launch for applications on Monday 4 May and more detail may be found on the government website here: https://www.gov.uk/government/news/small-businesses-boosted-by-bounce-back-loans
If you have any questions please get in touch with Cathal at firstname.lastname@example.org