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Small businesses to have access to 100% government backed loans

 

It was announced today that the government will increase the existing 80% guarantee for loans under the Coronavirus Business Interruption Loan Scheme (CBILS) to 100% for loans of up to £50,000 (or 25% of turnover if lower) to small firms. This has been called the Coronavirus Bounce Back Loan.

The scheme will make loans available of between £2,000 and £50,000 to small and medium sized businesses. It is not available to businesses that are already claiming under the CBILS, although there is a window until 4 November 2020 for any businesses that have borrowed up to £50,000 under CBILS to transfer the loan to the Bounce Back scheme.

The Chancellor announced that in most cases the money would arrive within 24 hours of approval.

The government had come under pressure from various sides, including the CBI last week (as reported in my weekly update on Friday) to increase the guarantee to 100% for smaller loans, due to delays in finance being forthcoming caused by a backlog of credit checks by lenders. The intention is for this new measure to help to clear that backlog and help struggling small businesses much quicker.

The scheme will start next week and will involve the completion of a two page “self-certification” online form by the applicant.

No capital or interest payments would be due for 12 months, and the government will pay the first 12 months of interest on the loans. The scheme is intended to help keep viable businesses afloat, hence an additional condition that the business must not have been an “undertaking in difficulty” (an EU term) on 31 December 2019.

Needless to say this is great news for small businesses; the CBI have called this announcement “transformational” and it will save many businesses from the very serious threat of failing. It is now up to the banks to speed up the processing of these loans now that their risk is effectively nullified.

Just a reminder that we have a CBILS checklist which you can use to help you pull information together to apply for the original scheme. As ever, please call us for any advice and guidance.

James Geary is head of Corporate Tax and is happy to help with any questions or concerns you may have at this time – you can contact James on james.geary@randall-payne.co.uk or 01242 776000 to arrange a call back.

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