Small travel firms may be able to access “transformational” taxpayer-backed loans of up to £50,000 within weeks under a new scheme announced by the Chancellor Rishi Sunak.
The chancellor told the House of Commons that the new scheme would start next week and should not be subject to delays that have plagued existing coronavirus business loan schemes as banks carry out lengthy credit checks.
The scheme will require businesses to fill out a two-page form online, with no capital or interest repayments due for a year, and will in theory allow successful firms to access funds within days of applying.
Payments through the Bounce Back Loans scheme will be capped at £50,000 or 25% of turnover.
Sunak said the scheme would be 100% backed by the government, which will cover interest payments for the first 12 months, but said it was not practical for it to underwrite all loans issued as part of its coronavirus schemes.
He said: “We should not ask the ordinary taxpayers of today and tomorrow to bear the entire risk of lending almost unlimited sums to businesses who may, in some cases, have very little prospect of paying those loans back and not necessarily because of the impact of the coronavirus.”
CBI welcomes coronavirus loans scheme
Dame Carolyn Fairbairn, director-general of the CBI, welcomed the new scheme.
She said: “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. Thousands of businesses could be saved by this lifeline. Banks now need to continue their work in overdrive to get the loans flowing faster.”
Mike Cherry, chairman of the Federation of Small Businesses, said the announcement would “give hope to thousands”.
“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 new fast-track system for those applying for them, will give hope to thousands.”