Smaller businesses in the UK will be able to apply for so-called rebound loans of up to £ 50,000 from today, fully backed by the state.
The government’s rebound loan program provides micro-loans worth 25% of turnover, up to £ 50,000, just 24 hours after application.
The minimum loan amount is £ 2,000 and there is a fixed interest rate of 2.5% with the government paying the first 12 months of interest.
Chancellor Rishi Sunak said banks would not have to undertake “forward-looking viability checks” and the government would bear all default risks.
Banks are also not allowed to ask for personal guarantees for bounce loans and there is no principal repayment in the first 12 months.
Commenting on the launch of the program, Institute of Directors’ chief economist Tej Parikh said, “The business interruption loan program has started to hit the front line, but small businesses are still struggling. to access funding.
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“This additional step should help more of these businesses get the money they need to support them in the weeks and months to come.”
CBI Chief Economist Rain Newton-Smith added: “A 100% government guarantee on loans and an easy way to apply will be a lifeline for many small businesses and independent traders under pressure. .
“The banks have been running at full speed and need to stay in overdrive to get more money faster. Hurry up. “
The rebound loan program comes after the government’s £ 330bn Coronavirus Business Interruption Loan (CBILS) program was criticized for being too slow to approve emergency funding for struggling businesses .
The government only guarantees 80 percent of these loans, which means tighter controls by banks and a longer application process.
This translated into just 25,262 loans worth £ 4.1bn in the first month of the program.
Sunak said the bounce loans will allow small businesses “to get the financing they need – helping them bounce back and protecting jobs.”
Business Secretary Alok Sharma added, “This new 100% government-guaranteed loan program gives owners of smaller businesses the confidence and flexibility to borrow the amount they want.
“This will help ensure they can continue to trade and will be a key part of our efforts to restart the UK economy.”